Fertilizer Companies: Factors Driving Profitability

While many industries currently face a climate of economic instability, fertilizer companies have been raking in record profits. Although most people take fertilizers to mean a few bags of fertilizers purchased here and there, the combined total of all their individual purchases form a huge customer base for the few large fertilizer conglomerates that dominate the market. This, combined with the great amounts of fertilizer used by large industrial farms to increase yields, have in recent years, led to exponential growth in the use of fertilizer and record profits for their producers.

The organization that represents fertilizer companies and promotes the use of fertilizers is the International Fertilizer Association or IFA. The organization determines the appropriate levels of chemicals used in fertilizer products as well as determines the policies and guidelines followed by the fertilizer industry. In addition to the IFA, environment agencies also play an important role in the regulation of the industry and in recent years have sought the promotion of organic fertilizer usage.

To ensure that their products meet country environmental laws, fertilizer companies market their fertilizers only after intenstive tests and experimentation. In this industry, ignoring or non-compliance with set guidelines can lead to heavy penalty and losses for the fertilizer companies. Presently, there has been a trend in the industry towards the production of more organic fertilizers so that soil conservation and environmental preservation are encouraged.

Farmers usually expand the use of fertilizers when crop supply is unable to meet crop demand and increasing the use of fertilizers to increase crop yields is the easiest way to make up for the shortfall of supply. In the United States, corn crops require the greatest amount of fertilizers followed by wheat, oilseeds, soybeans, vegetables and fruits.

Fertilizer companies in the United States are influenced by three main factors, as listed below:

Crop Prices:
Supply of crops depends on the skills of farmers as well as weather conditions. On the other hand, crop demand is determined by the amount of food that is consumed.
Value of the US Dollar:
the growth of fertilizer companies is also determined by international exchange markets. When the US dollar appreciates, fertilizer becomes more expensive and hence tends to lessen the demand for fertilizers.
Cost of Production:
Fertilizer companies’ fortunes are also dependent on the cost of producing different fertilizer products. For example, minerals are mixed in vats of acid for making potash and phosphate fertilizers. Factors that influence their cost of production includes, the price of raw materials such as natural gas and acid as well as mining costs.

Taking into account all these factors, fertilizer companies produce three main types of fertilizers. Commonly known as N, P, and K; these products are Nitrogen, Phosphorous and Potassium.

1. Nitrogen fertilizers (N) are influenced by the prices of natural gas as these are produced by processing natural gas with heated chemicals. The essential components include ammonia, ammonium sulfate, urea, ammonium nitrate and nitrogen solutions. The world leaders in the production of nitrogen fertilizers include China, India, the United States, Russia and Canada. These products improve the plants’ ability to absorb sunlight and convert it into nutrients.

2. Phosphorus fertilizers (P) are prepared by mixing phosphorous with sulfuric acid. The fertilizer contains triple superphosphate and monoammonium phosphate. The major phosphorous fertilizer companies and fertilizer deposits are found in the United States, China, India, Russia and Brazil.

3. Potassium fertilizers (K) are made of Potassium Oxide, commonly known as Potash. This is mined from ore deposits found in Russia, Germany, the United States, Canada and Belarus.

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