Edward Hall of Custom Ag Formulators examines bottles at the company’s Fresno manufacturing facility. Photo by Edward Smith
A perfect storm of obstacles causes a local fertilizer manufacturer to anticipate a bigger than normal slowdown.
Ryan Steward, vice president of Fresno-based Custom Ag Formulators, said the confluence of supply chain and labor issues – coupled with the persistence of Covid, the war in Ukraine and the uncertain water availability – has left buyers in the farming community divided on how to approach the next year.
Steward said the price of commodities increases almost every two weeks. The most notable ingredient for them is phosphoric acid, a key component of their most popular product. In March 2021, it could be purchased for $1.42 per pound. Now it’s $5.50 a pound.
When he saw that price, he knew that prices would have to go up for the farmer.
“We’re not the ones trying to rip people off,” Steward said. “I mean, we try to keep our margins as small as possible to help the end user.”
The management had even discussed the advisability of continuing to buy the raw materials. The price of their product was to go from $20 per gallon to $40 per gallon.
“We knew people just weren’t going to be able to afford it,” Steward said.
Knowing that some people might need the product and would be able to afford the high prices, they continued production.
For farmers, the lure of rising commodity prices is running up against rising input costs elsewhere, said Daniel Hartwig, president of the Fresno County Farm Bureau.
Fertilizers have increased by an average of 80%, Hartwig said. Diesel prices have doubled in some areas, according to Agweb.com. That means refueling a tractor can cost $1,000 a day. Diesel prices in California averaged $6.05, ahead of the national average price of $5.57 for on-road diesel. Water occupies an increasingly important place in the mind of every farmer. Water costs have made most crops unprofitable.
In the past, almond prices could support other crops, Hartwig said. But supply chain problems have caused kernel prices to plummet. The precious nut that farmers could count on to fetch more than $4 a pound has now fallen below $2. Growers have relied on foreign markets to sell excess production, but now the kernels are on the dock.
Overseas shippers can earn more money by returning empty containers to points of origin where they don’t have to wait to be filled. In many cases, it’s not worth spending a few extra days unloading the nut, Hartwig said.
This means that producers must turn to domestic markets to sell their products.
What Steward is seeing is more bearish activity from farmers. Most planting for this season has already taken place and purchasing decisions have been finalized. But now the builders have to start thinking about next season.
Steward anticipates a free fall. It’s been a busy year, but not as busy as usual, he said. Until the first rains, it is the low season for fertilizer manufacturers. Due to the expected slowdown, he began to reduce his crews.
The problems encountered in the field have started to affect suppliers who depend on producers.
“I think they all held up and unfortunately I don’t think anything improved,” Steward said. “Everybody left with what they had, that’s why we saw the slowdown.”