The boy who cried wolf

One of these years it will really be true.  Year after year fertilizer manufacturers sing the same tune and the retail chain carries the chorus – if you don’t buy it now we may not have it in the spring.  And year after year the pipeline fills up over the winter, spring comes and goes and nobody goes short.  And this year will likely be no different.

Nitrogen pricing is still weak in the gulf and buyers are gunshy after the volatility of the past few years.  Its an axiom of the commodity markets that nobody ever buys a weak market (just like nobody ever sells the highs).  That of course is why there are highs and lows – by definition there are no buyers at the bottoms and no sellers at the top.  The logistics however depend on buyers having inventory going into the spring and right now they don’t.

On another matter, Agrium is continuing their retail invasion in western Canada.  Currently the CPS flag flies over locations formerly owned by Parkland Agri Service (9 locations with head office in Didsbury), Ross Agri (10 former Esso locations around Camrose), ServAgro (3 southern Alberta Esso locations), RTL Agri Services (3 Esso stores in southern Alberta), Heartland Agro (former Esso multi-outlet business based in Moose Jaw) and Cheyne Agri Services (another Esso dealership in SE Sask.). 

In the case of the Esso dealerships Agrium already owned the real estate or at least the equipment located on the real estate as a carry over from their Sherritt/Veridian/Esso heritage.  Parkland was an Agrium joint venture so there has been a long term Agrium involvement there. 

There’s a couple of issues around this new competitor in western Canada retail.  The biggest question for farmers should be “how competitive will this competitor really be?”  There’s a good chance the reason the Esso dealerships failed can be traced directly to Agrium’s pricing policies during the 2008 run-up and 2009’s dramatic drop in nitrogen prices.   I’m sure the legal-beagles on Agrium’s 4th floor made sure everything was done legally but I doubt it was done morally. 

Right now about 21% of Agrium’s international sales comes directly from their retail organization but 29% of their profit comes out of the retail business.  So its not hard to figure out why they want to increase their retail outlets.