Fertilizer condos cater to do-it-yourselfers

Feb 20, 2012
by DTN

Randy Main, Buffalo Center, IA, retailer is building a fertilizer condo. As the name implies, the condo is a facility where farmers can store their own UAN32 for a fee without having the expense and hassle of building and maintaining on-farm storage.

“The idea here is to give producers more control in purchasing fertilizer with transparency a big key,” Main told DTN.

With the facility’s launch this spring, Main will cater to shoppers who have transformed the fertilizer chain since the great price bust of 2008. Back then, many growers vowed to bypass the middleman. Some farmers worried about becoming unsecured creditors if their dealer failed and their deposits vanished. Some now store much of their fertilizer needs on farm and self-apply to save money.

Condos appeal to that new do-it-yourself mentality, but the partnership may also help local dealers who need to rekindle relations with farmers even if it’s on an a-la-carte basis, fertilizer industry sources believe.

Main is completing his first “pod,” as he calls it—a mixing facility with secondary containment system and two 1 million gallon storage tanks for UAN32. The facility will feature a key-pad system which allows participating farmers to plug in a code and release a set a code and release a set amount of fertilizer they pre-purchased and then head to the field.

This is his first true “pod” system, although last growing season, Main began to implement this condo idea on a much smaller scale at his retail crop input business.

There are many advantages for farmers who want to use a fertilizer condo, he said.

The obvious pro would be that producers would not have to invest in and maintain on-farm storage facilities nor would they have to worry about licenses and insurance for storing fertilizer. Farmers would just have a storage fee in the fertilizer condo and do not have to buy into the facility, Main said.

Another advantage with condos is that growers can pool their purchasing power, an important factor when it comes to buying fertilizer. Main estimated purchasing a million gallons of UAN32 is where a price break would occur, depending on the year and market trends.

“This allows farmers to have more control in buying fertilizer compared to more traditional ways,” he said. “I purchase fertilizer for the whole group, and this can be anywhere from $70 to $100 a ton less, which includes the storage fee. The savings depends on the year, and this year’s savings was $75 a ton” compared to conventional retailers.

The fertilizer condo works like this: In March and April, Main will sit down with his condo members, determine their nitrogen needs for next year’s crops and have them sign a contract. This spring, he has about 25 farmers signed up.

Then it is Main’s job to purchase the UAN32 fertilizer. This will most likely occur between May and July. The 25 farmers essentially pool their resources together to purchase UAN32 at a discounted price, he said.

Once field work begins, producers can load their fertilizer as they need it and then transport it to the field for application. The computer controls how much fertilizer is pumped; the farmer will not get more than what he signed for in a contract.

Main declined to say what exactly his fee is for farmers who want to store fertilizer in his facility. He did say that even with this fee, he actually helps farmers save money by improving their purchasing power as they pool more gallons together.

With the first pod, which is located on the Main farm which Randy’s father and brother operate east of Buffalo Center, workers will be close by to help load fertilizer. If the fertilizer condo idea is successful, Main plans to put pods about every 60 miles in various areas in Iowa. These pods would be totally automatic; communication between Main’s office and the site will be by video cameras and microphone systems.

Bill Craig, University of Minnesota Extension agricultural business management specialist, said the fertilizer condo idea is an interesting innovation. One area of concern for producers would be the issue of financial security.

“Can they trust their business partners?” asked Craig, who worked many years in the fertilizer industry. “A couple of years ago, when 10-34-0 liquid starter was in short supply, some farmers were shorted product that they had paid for. So there are some risks with storing product off the farm.”

Main concedes this idea may not be for every farmer. Besides trust, one key is that participants must own application equipment, a barrier to some elderly or small operators.

Geography also might factor into the equation. Brent Hall, agronomy manager for South Central Cooperative located in Chariton, IA, said this idea might be more successful in areas of larger farm operations and where growers run their own application equipment.

In the future, liquid sulfur or zinc could be available in the pods to be mixed with UAN32 for custom fertilizer blends.— Russ Quinn, DTN