Josh Linville on Unveiling the Complexities of the Global Fertilizer Market and its Impact on Food Security

Discover the invisible forces shaping our dinner plates as Josh Linville from StoneX unveils the high-stakes world of the global fertilizer market. Our latest episode takes you on a journey through the geopolitical chessboard, where the moves of countries like the Middle East, Russia, and China dictate the flow of nutrients that power agriculture worldwide. As we navigate the turbulent waters of trade disruptions and regional conflicts, Josh dissects how these events ripple through food production and the wallets of consumers everywhere.

Shipping routes aren't just lines on a map—they're lifelines that carry the essentials for our harvests. Amidst the backdrop of a world reeling from the Russian invasion of Ukraine, we probe the delicate dance of transporting fertilizer, with a particular focus on the pivotal role of the Middle East. As Josh shares anecdotes of vessels rerouting to avoid conflict zones and the consequent impacts on delivery schedules, it becomes clear just how intricate and vulnerable our supply chains are—a puzzle where the pieces are constantly shifting.

Technology in agriculture isn't solely about the latest tractor model—it's a revolution happening at the very roots of our crops. Josh walks us through the cutting-edge developments in fertilizer application, from stabilizers to biologicals, and how these may redefine our approach to farming. Yet, as the industry grapples with high prices, we consider the possibility of a silver lining: a rethinking of fertilizer use that could make our food supply more resilient. Join us, as we explore the rich tapestry of market dynamics, innovative strides, and the hard decisions farmers face in the quest to feed the future.

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Transcript

Speaker 1: 0:08

My name is Michael Gaiad, publisher of the Lead Lag Report. Joining me there is Josh Flinville. Josh, I've actually had a couple of your colleagues with Stone X on Spaces in the past, but interesting stuff to the audience and to me. Who are you? What's your background? What have you done throughout your career? What are you doing currently?

Speaker 2: 0:21

Yeah, so I grew up on a farm in Northwest Missouri. I always had great ambitions going to college, going to investment banking and stuff like that and somehow got sucked right back into the ag sector. As soon as I graduated college I went right into the fertilizer space and I've been here for 20 plus years now. My entire career has been in fertilizer. I'm one of the few. The fertilizer space is one where folks tend to stay in a company for very, very long time, so I kind of have a unique view on the marketplace. I've worked for a North American distribution company. I worked for a North American nitrogen manufacturer. I worked for then the largest global trader in fertilizer, and spent a little time in Melbourne, australia, as a general manager of trade before coming back here to Stone X and heading up the global fertilizer book. So it's been a long and winding path. I've seen a lot of the world and I ended up about 30 minutes from home. So I guess that tells you something.

Speaker 1: 1:14

All right. So let's level that a little bit and explain what fertilizer actually is and why it is so important.

Speaker 2: 1:20

Right. So in order to? We're a growing world and it continues to get bigger and bigger. There's more mouths to feed and you have to. In order to raise that bigger crop, you have to provide nutrients to it, and so that's something we learned a long time ago. It's been a growing industry globally. So what we're looking at is basically, in order to produce the crop yields that we're doing around the world, you have to replace the nutrients in the soil. You have to have the nutrients out there to produce a crop. So if these events that we've seen over the last few years, if these bad events occur, if these vessel trade routes get shut down, if sanctions start to shut off fertilizers, the scary part of it is we cannot produce the food like we have. And if we can't do that now and then we're talking about who in the world is going to start, because there isn't going to be enough food production to meet that rising population.

Speaker 1: 2:09

Let's talk about the different places where fertilizer is a big export in terms of just global vulnerability. Where does a lot of fertilizer come from?

Speaker 2: 2:18

So and unfortunately a lot of these countries or a lot of these regions can be tied to areas that are kind of higher tension right now. Number one for nitrogen, it's the Middle East. When you look at nitrogen production, obviously a big input for a lot of it is net gas. Well, look at the Middle East. They flare the stuff off they don't have it need for. So fertilizer manufacturing became a very hot use for that byproduct. So the Middle East is incredibly important in terms of global fertilizer.

Speaker 2: 2:47

In terms of global nitrogen, russia is a major player. They are a major exporter for all three types of nutrients nitrogen, phosphate and potash. That's a large part of why, when they invaded Ukraine, all these sanctions popped up and people thought, oh, we're going to really hurt them. Well, they didn't factor in just how heavily dependent their economy is on natural resources. They export a lot of it, so they're an important player. China another one. They're important on the Urea and the global phosphate export. They're the largest DAP map exporter in the world during typical times. So there's obviously a ton of players out there, but those are the three main ones outside of the US and different areas, but those are the three biggest ones that we have been watching because those are three fairly hot locations around the world.

Speaker 1: 3:31

Okay so, and we're going to get to the geopolitical risks, but is there sort of a we're called seeing this on Bloomberg Bloomberg terminal a while ago but there is sort of a price for fertilizer, right that's aggregated from all these different places. What, assuming my memory on that is correct, well, I hope it's trend been. You know, there was a lot of talk about fertilizer and a lot of movement with fertilizer when Russia went into Ukraine, but what's happened since then?

Speaker 2: 3:55

We have seen prices steady to down. Hey, if we go all the way back to early 2022, that's when we set the high. And at that point in the world there was a lot of uncertainty, to your point. Russia just invaded Ukraine. There's a lot of fear in the world of fertilizer that we were just going to lose Russian exports all together. We thought, crap, we're dealing with the situation. We might start blockading their reports, we might sanction them to where nobody in the world can do anything with them.

Speaker 2: 4:21

At the same point, china then, sensing the fact that global prices were up, sensing the fact that global inventory has been very tight, started to put export restrictions on their books, started to sell their companies. Listen, we're communists, we take care of our own. You're going to keep these tons in China. You're not going to send them around the world. That further tighten the belt. So since that point we said if a market and fertilizer didn't set a record high in that March, april of 2022, it came very close to it. But since that point we've actually seen prices come off fairly significantly fasting, not quite as much as everything else phosphate, title loss, staying power. It's had more issues the nitrogen and potash. When I ran the numbers last time I think those values were down about 50, 60% for more of the highest worth.

Speaker 1: 5:02

Phosphate is probably more like 30, 35% today off that high and are there certain sort of back of the envelope type of calculations around? You know, if fertilizer drops by this much, this is the typical amount that you see other food staple drop in a few months. Is there some sort of like ratio that historically you tend to look at?

Speaker 2: 5:21

It's not really, and that's the unfortunate part of it. They both kind of move on their own S&D, but there can be a little bit of a late lag. So a great example right now is phosphate compared to corn. We have seen the phosphate price. It has come down from its high let's just say Null, new Orleans, louisiana, dap. That price reached about a high of a thousand bucks a ton. Today that number is probably closer to 3, I'm sorry, 630, 640. So it's come off, but not as much as we see everything else.

Speaker 2: 5:48

But at the same point corn values have been devastated. December 24 corn had been hanging in a 510 to 525 range. Here recently, actually this morning, 465, and that's a bull run from where it had been. It had been all the way down to 545. What has happened is today, when we look at that comparison, that ratio, how many bushels of corn it takes to pay for one ton of phosphate, we are the second or the third worst ratio going back to 1989. The only reason I say 1999 is that's where our record stopped. I would dare say it's probably in the history of phosphate. So yes, there is some correlation. But unfortunately products like phosphate have been breaking the mold here recently.

Speaker 1: 6:25

Yeah, it's pretty remarkable how much of a round trip there's been in the ag space, despite all the narratives with Russia, ukraine and food scarcity and everything's going to be starving. And all this Protolise has only been a part of that story. What else has caused broader bear mark, let's call it in the food staple side?

Speaker 2: 6:44

As far as the grains go or in terms of the grain.

Speaker 2: 6:49

Obviously, again, we'll go back to early 2022. It's all the uncertainty and any given market out there. When you become fearful, your prices tend to go higher, right, because you just don't know what's going to go on. You don't know how the ramifications are going to play out, you don't know what is coming next. You don't know what's coming down the pike.

Speaker 2: 7:04

I would dare say a lot of the issues we were dealing with back in early 2022 are basically the same of where they are today. We're still talking about Russia in terms of the fear of losing those exports. There was recently a political assassination and people are calling for Russia's head, basically saying every single thing comes out of the country. We need to sanction them. We've not seen the reaction because we've been through this. This is a known event. This is something we've dealt with before. So everybody's kind of like, yeah, okay, it is what it is, but then you move on down the road. The worry of China maybe they're here, maybe they're not. We've dealt with that. Like I said, a lot of these factors are still in play, but because we've now normalized them, prices have come down, just as a reaction.

Speaker 2: 7:43

I would say the same thing on the food side. We're not that much better off Now in corn and things like that. We're talking about some pretty big carryouts. We haven't raised the crop yet, but what was it? Somebody told me one time, if a corn trader, if you brought them forward in time from like 10, 20 years ago and you showed them the carryout that we're dealing with today compared to what it used to be, with the history being so much bigger of a carryout, they would lose their minds and corn prices would be $7, $8, $9 a bushel. Well, we're dealing with very tight carryouts and we're talking about corn prices in the 450, 460 range.

Speaker 1: 8:15

We have normalized a stressful event, which is funny how that seems to be the case. I would go back to the idea that nothing matters until it matters, and then, when it matters, it's the only thing that matters, and then it's all into the next thing. Right, but you do have some notable differences, I'd argue, maybe even have more risks with this. Red Sea attacks and the Oothe dynamics Talk about how that has maybe altered some of the supply chain, a dynamics when it comes to fertilizer. Is the market maybe underestimating the impact of this longer term?

Speaker 2: 8:43

Well, I don't want to say it's underestimating. I think the market is fairly well aware of the ramifications, but I'm not going to say fortunate. That's probably a bad use of terms given what's going on here recently and at least with the Oothe attacks in the Red Sea. There are alternatives when we think about it, and with a lot of that product coming from the Middle East, when that ship is heading west let's say it's coming from the Middle East, it's going to North America it can choose either to go through the Swiss Canal, through the Red Sea, or it can choose to go south around Africa. Well, now that we have an idea of what's going on and we know, hey, the last vessel that was struck and actually ended up sinking was full of fertilizer. We don't want to be a part of that. So we are going to opt to choose the war time clauses in our contract. We're going south.

Speaker 2: 9:22

Now that does add additional fray rates. Obviously it's a longer haul, but the more important part of that and this is especially true right now on the calendar because we're starting March it adds a couple extra weeks of sail time. It's not nearly as quick as it would have been. That's the part that actually concerns me is for most of the calendar I'd say 90% of the calendar an additional two-week sail time on a vessel does not matter as lick, it just doesn't have any impact. This time of year does, with spring right in front of us, or for some products, rolling two weeks can make the difference between it made it in time and it didn't.

Speaker 1: 9:53

The impact of that would be that it sounds like there would be a tailwind that favors another uptake in anything that basically you had. Fertilizer is used in any kind of food.

Speaker 2: 10:03

Yeah, absolutely. If all of a sudden, we start to find out that phosphates from Saudi Arabia isn't going to make it in time for summer, well, I'm sorry for spring time. Well, we're going to have phosphate prices spike right now because the S&D is out of whack, but that's also going to cause summer price to go down, because we just brought a vessel in that we didn't need because it was too late, and now we got to start worrying about well, did we have enough phosphate to go around to cover all the crops to get our top end yield like we're expecting for this year? There's a lot of different things that go into it, but it's just a. It's another unknown that we really didn't we need to deal with today.

Speaker 1: 10:33

But how much goes through that through? How much is that risk as a percentage, if you can quantify it when it comes to anything going through, and then who would be at risk?

Speaker 2: 10:42

Well, that's the problem. We don't quite know what's split out in between what goes through there and what goes south. I will say a great perspective of it is. This year for Uria the US is going to import about 5.1 million tons of Uria. One out of every two tons of Uria that comes into the North American marketplace comes from the Middle East and I would say, normally speaking, that is the majority of that stuff would go through that Red Sea corridor. So right there, just alone there, you're talking about 2.5 million tons on an annual basis. That doesn't include the the tons that have been coming from Saudi Arabia. And that's into the figures because of the countervailing duty rates that we have right now against Russia and against China and against Morocco. So we're more reliant on that one as well.

Speaker 1: 11:24

When we talk about the Middle East as a risk, I mean OPEC is obviously a different dynamic entirely when it comes to oil, because it's coordinated, or at least pretends to be. You don't have to think of that with fertilizer. So what is the actual impact of you know that term for the idea of Middle East tensions? How does that actually impractice factor into changing supply or export from different countries?

Speaker 2: 11:46

Well. So when we're looking at the Middle East, it's never one that we think that they're going to start limiting the number of tons that they produce. Again, their input is a byproduct that basically has no value. They're going to produce oil, whether they utilize that or not. If they flare it off, so be it. They're still making plenty of money with each barrel of oil.

Speaker 2: 12:02

The thing that spooks me is more about the shipment availability through the Persian Gulf or the Strait of Hormuz. If you go back to the last Persian Gulf or the Desert Storm, one of the big storylines back then was the ability for vessels to transit the Persian Gulf. And they were talking about oil right, because oil is so much more important, especially then when we are so much more relying on them. And they're talking about, oh, if Iraq strikes these vessels and it's moving the free rates up, this, and that We'll look at Iran right now, obviously the Houthi rebels, whatever they're talking about, but Iran is closely linked to the Houthi rebels and if these attacks continue, patience is going to wear thin. And if we go down that road and again I'm going to say this is a very low probability situation Nobody wants this war, it seems, but if it did play out. Iraq had a very small waterway on the north end of the Persian Gulf and we were worried about them hurting shipments. Look at the Persian Gulf, go. Look at a map.

Speaker 2: 12:51

Iran dominates the entire eastern seaboard of the Persian Gulf, of the Strait of Hormuz. It is so much easier for them to stop vessel flow and we've seen that already. They stop ships, they board them, they pull them back into their waters, and we talked about that back then. Right now, uri is not nearly as long as well supply as it was back during the Desert Storm. If they suddenly start doing that, we are talking about millions upon millions.

Speaker 2: 13:15

I'd say, dare say over 10 million tons of Urea on an annual basis comes through that waterway and gets shipped around the world. Easily one-fifth of the world's exports of Urea comes from that Persian Gulf corridor, if not more than a fifth. So that's my biggest thing. I'm watching right now, where I'm again very low probability. It doesn't seem like this is going to be the case, but it's the first thing I'd do when I wake up is I check the news and I check to see is anything happened to Persian Gulf. Yeah, I'm still watching Red Sea, but that's probably second. The first thing is absolutely the Persian Gulf intention in that area.

Speaker 1: 13:44

So anything when you look historically when it comes to policy changes or policy responses that has an impact on fertilizer from the US government side doing something, or is it largely sort of not a not something we can have any real impact on?

Speaker 2: 13:58

For the most part, I don't think DC, most of DC even knows what fertilizer is. It's just not something to discuss.

Speaker 1: 14:03

very often they don't even know what space for it's going. It's a whole different story right, exactly so.

Speaker 2: 14:06

There's a lot of jokes we could go down that one. I probably ought to not say them so I don't get in trouble with internal, but it's not one of those things that gets talked about. There's a lot more in your face markets out there that they're going to worry about. However, here in the last couple of months we have seen Senator Grassley and some others that put forward a bill about fertilizer visibility. The US government placed sanctions against China, russia, morocco for phosphates coming to the US. That's getting a lot of challenges from the industry, from the demand side of the industry, saying these rates no longer apply. You need to do away with these. Of course, mosaic, who called for these rates to be put in place, is challenging against it. So it is probably getting talked more about now that it has been in the history of DC. But still, I think you'd be hard pressed to walk into any congressman or senator's office and say you want to have a talk about fertilizer and they will look at you like you just grew a second head.

Speaker 1: 14:56

When I look at the chart on Mosaic, it looks like it peaked in March, april 2022, around 1973, I've got cut basically a little bit more than half since then. For the stocks that are involved in the space, how sensitive are prices to fertilizer directly? In the same way that people say gold rising, gold miners rise, you did a similar to one for one relationship.

Speaker 2: 15:19

Well, and I don't talk a lot about the stock just because I don't track it, it's enough just trying to stay on top of the marketplace, I would say. I mean, when you think about it, the cost of producing phosphate hasn't really changed. In that same time, there's two main variable rate inputs for it it's sulfur and it's anhydrous. Those markets have come off, those costs have dropped, but they're not really moving up and down tremendously. Really for phosphate, it comes down to the ability to be able to find phosphate rock reserves out in the ground somewhere. That's the biggest problem phosphate has is the inability to find those reserves. The newest one found was actually in Norway, but that's going to take years to develop. But obviously, phosphate producers and, frankly, fertilizer producers across the board enjoyed some very, very good times in 2022. A lot of those good times are still rolling, maybe not quite as good as what it was, but still looking very solid, at least for the short term.

Speaker 1: 16:08

You think it's fair to say that tracking fertilizer might be a way of getting a sense of the market's complacency, or maybe worry around geopolitical risk, in the same way that people often reference oil in that way?

Speaker 2: 16:19

Yeah, a lot of times they'll sit there and say and I don't mean this in a mean way, but fertilizer is kind of an immature market and how it works. It's one of those markets where if you were to sit there and set up, strip away all the names and everything else and you put the business model in front of a lot of the business schools around there, they would almost laugh you out of the room and say who would ever do this? It's still a very flat prized, non-hedged marketplace. When I sit there and I see these events that are going on around the world and you see the lack of reaction to market, I struggle between thinking well, fertilizer always finds a way. We always seem to find the product when we need it and part of it just being like well, I don't quite know.

Speaker 2: 16:58

There's a lack of information in the fertilizer space. That's a lot of. What we've been doing is trying to bring that education forward. You can find article after article about grains and metals and everything like that. If you've got to do a research paper on fertilizer, good luck. That information is not out there. And actually one of the things we do. On an annual basis, we put together a global trade flow book and it looks like the 10 biggest buyers and sellers of Urea. So where does that product come from? Where does it go to Potash, uan, all these different products? We do that just so that when we hear all of a sudden, oh, gaza attacked Israel, all of a sudden we had to get very worried for potash, because Israel's the fourth largest potash exporter in the world. A lot of people don't realize that. So it's a little bit of a combination of the two.

Speaker 1: 18:16

That point about the data sources I think is interesting, right? I mean, it's largely fragmented and you're trying to consolidate in a way that's digestible for a client. Maybe talk about that process a little bit more. I mean, where are you actually getting information to try to get a sense of trends on fertilizer and impacts on different countries?

Speaker 2: 18:33

It's. There are a couple fertilizer organizations out there I wouldn't call them lobbyists, but groups that have some of this information available and we kind of put it into pieces where people can easily digest it. So it just comes down to research, just going out and trying to figure out okay, what does Saudi Arabia produce? What did they ship last year, what are their official export numbers show last year? And it's really trying to pull together all of these various pieces into one spot that's easiest to look at and say, ah, okay, that makes sense, let's go with this.

Speaker 2: 19:04

But again, that's the problem with fertilizer. It's a market that the manufacturing side is the one that makes a lot of the profit, and rightfully so. They've invested billions of dollars into these marketplaces, so there should be some reward there. But they are the ones that also have their teams. They're the ones that have their analysts, and if you're a manufacturer, you're long every day. How often are you going to sit there and take a bearish story from your analyst and go push that to the marketplace? And again, that's the thing. It's not to say they're always right, they're always wrong, it's just we're trying to show a little bit of a different point of view and make that information more readily available. So when we are told something, we can say now, wait a minute. But what about this and this? That's something that hasn't really been available to the masses until now.

Speaker 1: 19:46

What would it take to have some kind of extreme tail events in fertilizer prices? Meaning is it as simple as you just need some beyond extreme weather conditions globally, you need a world war. I mean, what would it take to really get a spike up or crash down?

Speaker 2: 20:03

So, on the spikes up, I still think, on the nitrogen sector. I think it's that Persian Gulf. If suddenly there was a direct conflict with Iran and it includes the waters of Persian Gulf, you're going to have a lot of vessels around the world say there is no way I'm going to chance the safety of my people or the safety of my equipment going through a war zone. Yes, you may have a lot of these Western worlds who are saying we'll do everything possible to protect your boats. We cannot protect every piece of water in that waterway. So if that happens, all of a sudden, you see nitrogen spike. If all of a sudden we're to shut off Russia from the world, then that's easier said than done, right? Because even if the Western world sat there and said, okay, no more Russian fertilizer, well, does that include Brazil? Probably not. What about India? Probably not. Latin America could probably continue. So they'll be able to find homes that way. So that's not very likely. China removing themselves from the world market? Again, it seems like they're willing to engage. So it doesn't look highly likely, but something we're watching. But I would say on the downside, and truthfully, this is something we had seen.

Speaker 2: 21:00

It goes back to the grain price. Corn prices have been devastated. A lot of the other grain prices have been devastated here in recent months, and especially for corn. When you look at the forecast, when you look at what we think we're going to grow, we're using 92.1 billion acres in the US market and you figure a 181 trend line yield. With the carryout that we're facing, the worst of the corn price fall is not behind us and, ultimately speaking, if the farmer can't justify the purchase, they're not going to do anything. And if they don't do anything, well, the retailer's not going to take that price risk either. They've gotten their hand burned way too many times. So now, all of a sudden, you have a demand side of the marketplace who just sits there and says no, your price is too high, I have to go to a just-in-time demand model in the middle of the season. So be it, I'll do it, I'm not taking a risk.

Speaker 2: 21:45

Well, now all of a sudden you get a huge unsold book on the manufacturing side. Eventually they have to break and say we've got to approach the market, We've got to get this stuff moving. We'll start dropping our price to get these tons flowing. So, and that's a little bit of what we're seeing today. Unfortunately it's a little bit of a delayed reaction, just from the standpoint that spring season is so near, it's just too late. You can't sit there and hold off. You can't wait until June, july to buy your spring needs. You won't be able to get to the field, so the buyer is forced to set forward today. But once we start hitting those warmer months, once we start getting May, june and we start focusing more on the December 25 corn crop, that's a whole different story. Now everybody is sitting there looking at their books and saying I didn't have a great year this year. Next year does not look profitable. I'm not doing a thing until something tells me I absolutely have to do it and today is not that day.

Speaker 1: 22:30

Just to reset the room for the remaining 20 minutes here. Everybody, please make sure to follow Josh here on X. As soon as you mentioned, the corn and wheat have been devastated. I want to know when that translates as a grocery.

Speaker 1: 22:42

And I think it's probably what most people are probably most interested in, because I tell you it doesn't look like prices on the food side are dropping anywhere, at least not in New York. But talk about that for a bit, because there is the ag side and trends that change there, but it seems like food prices are only in and out front.

Speaker 2: 22:56

Yeah, and unfortunately you go talk to a couple cattle farmers and you'll quickly find out that sometimes a drop in the price of our side does not reflect into a drop in the price of the grocery store and that very well could be the situation that we're in today. Once a market sets a higher price, it's very difficult to get that to come off. Everybody kind of gets used to it. Somebody in the middle is getting rich, but a lot of times it is not the farmer. You know a lot of the livestock industry and again we've got a team of experts in this. I'm not, I just kind of know from the guys I talked to out in the countryside but they've been sitting and looking at the price of steak and everything in the grocery store and saying, boy, that is nowhere near what I'm selling cattle, and so I don't know that.

Speaker 2: 23:36

This is one of those sayings, because when you think about raising a crop, we're talking about from a fertilizer side and that's what I, my entire life is lived on is just the fertilizer side. But that doesn't take into account the cost of seed, the cost of chemical, the cost of land, the cost of equipment, the cost of diesel fuel, the cost of insurance. There are so many different inputs into every single acre of every single grain around the world. Fertilizer is just one input. We try to look at it just from our standpoint to if you can get a little bit of a better deal, save a few bucks, whatever they want. But just because fertilizer comes down, I don't think that reflects into a direct impact at the grocery store. We need a lot of these inputs to drop before we start talking about that.

Speaker 1: 24:14

Yeah, I mentioned Russia, china, the Middle East. I'm curious to hear how India plays into all this. Because they are market, their economy have been booming at the expense of China. One can argue and anybody that bullish on emerging markets or in India. We'll say the same thing. Because more and more people rise out of poverty, the first thing they want to do is have better protein right and better food in general. How does India's demand impacting fertilizer longer term?

Speaker 2: 24:40

So they remain one of the biggest buyers in the world as far as fertilizer goes, and they've got a very unique way of doing business For a lot of other countries around the world. People just import it, they move it through the system. It goes out to the farm gate. India does a different approach. What they will do is they have what's called purchase tenders and this I think this is their way of making sure there's no backroom deals or kickbacks or anything like that. And so they will name a company to control their import tender. Let's say Urea, for example. And they'll go out there and say okay, we're looking for 1.2 million tons of Urea. Here's our shipment window. Offer us what you want to offer us. And then companies around the world, if they're approved, will go to India and they'll give them an offer. They'll say I'll offer you 50,000 ton at this West Coast port at $400. Well, everybody submits these bids and then they'll come back and they'll open all the bids and they make it public so everybody can see it and the lowest price on each coast sets the value. And they'll go back up the offers and say do you want to sell us this lowest price? Yes, okay, we'll send you a contract or no? Okay, we'll move to the next one. So they've got a very unique, a very open and honest process for purchasing their fertilizer, and it is a great way of kind of gauging the spot market, to see where everything is, because, for all the bluster, all the talk, all the storylines, that is where the rubber hits the road.

Speaker 2: 25:57

However, they have been pushing very hard to produce more of their own. We have seen them produce. They're actually one of the few around the world that's actually built new nitrogen production and they've actually. These plants have been doing phenomenally. We had expected to see them here in the month of February but because their production is doing so well, they actually were able to back off and we may not see them until mid to late March. They've been doing so well. So they're trying to disconnect. They're trying to get more stuff down the road. Like everybody in the world, they're trying to get away from being reliant on others and produce their own.

Speaker 2: 26:58

So but to your point, we saw this in China, we're seeing that in India as these countries develop, you're absolutely right. You get to the point where it's like I can only handle so much rice or anything like that. Cheap goods, cheap foods. I like steak. I like steak over chicken. I like this food over that food. So, as your taste started to develop, that puts that much more demand and I would say India is probably one we need to watch very closely going forward. They're probably one that's looking to emerge. I'm with you talking to my financial guy. I like anything associated with India right now.

Speaker 1: 27:26

Okay, so you've got this research putting content out there. What are the type of clients that have looked to the kind of research you're putting out on fertilizer, and how do they typically use it? What are the action steps if somebody sees something going on with fertilizer?

Speaker 2: 27:39

So we've done a couple of things that we put out. The biggest one that people see on Twitter is the farmer fertilizer newsletter, and the reason I started doing this is and I never quite understood it, but I can never. Obviously I didn't know enough about it growing up to really think about it. But when I got into the fertilizer industry I noticed that for most of the farmers around the world it really didn't matter where I was around the world their biggest input was fertilizer. And when you ask them well, how do you determine when you're going to buy your stuff? They're like well, the retailer tells me or I just buy it in June, I buy it in September. There's not a lot of science, so it's your biggest input. Yet there's very little knowledge known about it.

Speaker 2: 28:15

So we try and do like a monthly newsletter where we talk about hey, here's the things that we're seeing. Here's where we think the market is going. Here's some of the big events that have happened. Here's what you need to watch out for. I try to steer clear of something they're saying you should or should not buy it, because, at the end of the day, I don't know a farmer's economics. I'm not there to make their decisions for them. I want to present the information. Let them choose, but we try and do that. If there's something big to have some mid-month, we'll try and send something out, but we'll put that. Actually just sent out the newsletter Friday and just before getting on here I finished up the fifth video, so getting those approved and got those out here this afternoon.

Speaker 2: 28:48

But if people are interested, it's just the Stone X Farm with fertilizer newsletter. You can Google it simple registration site. But then there's also a bigger package. It's a lot more information, it's a lot of stuff to digest, it's a much bigger cost, but this is more for the retailer, for the trader, for the manufacturer and it goes into the daily price movement. It goes into a lot of global S&Ds and things like that. So that's something we do on a one-on-one basis. Chat about that. They can always reach out to us about it.

Speaker 1: 29:14

When you think about sort of modeling the trajectory of fertilizer, is it fairly predictable or is there a lot more rate than this I'm thinking about versus stocks, for example, day-to-day or two weeks? Do you find that it's a more predictable market or are there exogenous variables that are hard to really factor in?

Speaker 2: 29:32

I think it's a little bit easier to call, though I will say the first thing I typically try to do when I'm looking at a market, like when I'm putting together these newsletters the first thing I try to do is look at the market and say is this thing being driven emotionally or fundamentally? And that's one of the issues with fertilizer, because it doesn't have all the outside parties with all these savvy models that they use in this, and that it's still very much a relationship-driven kind of a. Well, I'm going to look at it and I think this. And if enough people think something, that becomes reality. And so that's the biggest thing that probably makes it a little bit harder to figure out outside looking in, is this thing being emotionally driven or fundamentally driven?

Speaker 2: 30:11

And eventually the fundamentals went out. But we have certainly seen enough times where the market believes enough of the emotion. The thing starts to take off and there is just one of those words like hey, everything fundamentally told me this, but it went this other way. That's just fertilizer being fertilizer. There's been a lot of people get their hands burnt because of that situation.

Speaker 1: 30:28

How is the technological investment efficiency factor into fertilizer demand? I mean not to necessarily bring AI into the conversation, but I'm sure at some point somebody's this AI and that's going to make some fertilizer go vertical. But you know there's always technological efficiency, even when it comes to farming and growing food. Does that change anything from a longer term perspective.

Speaker 2: 30:51

I've struggled the AI part in the fertilizer sector not to sit there and say they won't eventually get there. I just don't think fertilizer is going to be impacted nearly as early as a lot of the other industries out there. It's still like I said, it's still a relationship driven marketplace. It's a lot of chats, it's a lot of conversations, things like that. We had a conference in Orlando and a lot of the industry shows up and of course they're based on their stories and doing things like that. So now there are other technologies in terms of additives to the fertilizer. Maybe it's a stabilizer, maybe it's a biological. Those things are trying to be kind of the next wave of fertilizer. Some of them work. A lot of the stabilizers actually do a fantastic job so that nitrogen doesn't get leached into the air. Some of the biologics I had still struggled with. I think it's kind of neat. It's exciting technologies but I've not seen where it changes the S&D yet.

Speaker 2: 31:41

But, like I said, fertilizer is still kind of an immature market, kind of slow in the uptake. But when you look at the agronomy side, there has been so many snake oils over the years, over the decades. Everybody is very skeptical and everybody is kind of worried because it's like hey, I've taken over the family farm. My dad did it this way, my grandpa did it this way, my great-grandpa did it this way. This is a century farm. I don't want to be the one to try something completely new and lose the farm. I don't want to be that guy. So I don't want to say it's slow to adopt new stuff. But it is taken with a little bit more skepticism versus other markets who see something like AI and literally can't jump into it fast enough.

Speaker 1: 32:19

I was almost cringing at the AI question because it sounds so ridiculous when I say it, but at the same time it's like. This is the way the market is thinking, even though prices aren't responding beyond Nvidia and Supermicro. That's a whole different discussion.

Speaker 2: 32:29

So the way the US shows their numbers on imports, that's always a 60-day delay. So we have data up through the end of December. We know the first half of this fertilizer year, with the fertilizer year being July 1 through June 30. We will get the January numbers here later on this week. I think they come out Wednesday or Thursday. So that'll be interesting to see how January shows. But I will say we are currently using 92.1 million acres of corn and if we figure Urea demand, for example, is going to be quote unquote normal. We think we need 5.1 million tons of imports to meet our demand. June I'm sorry, july through December, we had brought in 1.3 million ton Toss June, just because it's too late for so much in North America. That means January through May. We need to bring in an average of between 625 and 650,000 tons of Urea. That seems like a lot, but when you consider the fact that we have brought in seven figures a couple of months in a row, it's absolutely a doable number.

Speaker 2: 33:23

I'm not worried yet about nitrogen. That isn't to sit there and say that we couldn't have some hiccups. I'm just not willing to pull that trigger yet and start freaking out about it. We always tend to get the tons that we need to. We think January are going to be some fairly decent import numbers. We're hoping it's going to be fairly decent. Fed March might be a little on the rough side, but then again I think maybe late March will catch several more vessels. In an April May We'll have some pretty good upticks as well. So I'm not quite to the point of worrying that we're not going to get enough Fosfate.

Speaker 2: 33:52

Frankly speaking, the Fosfate price has gotten so high versus grains. I think that the quote unquote fringe acre, and what I mean by frange is that corn acre that was not corn prior to the ethanol boom. So let's face it, it's the 125, 150 bushel per acre land. I think we're going to see some cuts there. I think that we're going to kill that demand. Your Iowa's, your Illinois, your Nebraska's the corn belt is going to fertilize. You raise 300 bushels per acre. You've got the money. You're going to top in your yields. But those outer areas are going to sit there and say I've got to do something different. Your pasture ground has got to do something different. Maybe even wheat grounds got to do something different. So I think the imports on the phosphate side are going to be tough, but I think ultimately we're trying to kill the demand to rebalance the S&D. So sorry, man, that's all a very long-winded way of saying I'm not worried, we won't have enough. The price will figure out a way to balance that S&D and that's what we've been seeing. Fosfate is up tremendously. Urea, here over the last couple of weeks, has been up tremendously. The market balances itself. That's the great thing about a free market and that's why we never sit there and say you won't be able to get your hands on it. You may not like the price, you may not love the timeframe of it showing up, but you'll get it if you're willing to do both of those two things. So this is a great question and this is something we have done. Some projects and the folks we did the project for didn't like our answer A lot of those green produced nitrogens that are being discussed out there, that are being looked at, even being built, I have not yet seen one that makes financial sense without the support of massive subsidies from the government.

Speaker 2: 35:18

And I'm going to say this is completely just Josh Lindville's gut reaction to the whole situation. This is not any sort of a stance or anything like that the company is taking. But when I look at it it almost feels like something people are doing to check a box. It looks good. It feels good when you talk to farmers and if I were to go, like my dad he applies a lot of custom anhydrous in Northwest Missouri if I were to go to him and say, hey, dad, I can get you some green produced anhydrous and it's going to cost you $50 per ton more, but it's green produced, so you're helping I probably wouldn't be invited to Easter.

Speaker 2: 35:53

So it's just, it's a very hard uptake. It's one of those things that if it's going to work, it is probably going to have to be a government driven situation where they are forcing farmers to do something. And I would say DC is probably very skeptical trying something like that. It's election year. You see what's going on in Canada. You see what's going on in Europe. If I am a politician, I am stirring very clear of trying to tell any farmer what they should and should not be doing. So again, sorry, it's a very long answer in my saying. I struggle with it. I understand why companies are doing it and maybe the technology will improve, it'll make more financial sense, but as of right now it seems more like checking a box and it does any sort of an economic decision.

Speaker 1: 36:31

Josh, fertilizer doesn't come across to me as let's call it maybe a super exciting part of the marketplace to pay attention to. I mean certainly it's no Dogecoin or Bitcoin, but are there times just being in the industry as long as you have been, where, like you, get really excited about what's going on with fertilizer, like, aside from the geopolitical stuff, that we talk about other things in your career that you know we're like, okay, this is something that really pay attention to that nobody's really looking at?

Speaker 2: 36:55

Yeah, and it's frankly right now, for the first, say, 10, 15 years of my career, this was kind of a job. This is kind of one of those things where they come in fertilizer. Why didn't I do investment banking? Why didn't I do Bitcoin? Why didn't I do all these quote unquote sexy markets where it's crazy and all these people are making lots of money Over the last, say, five or six years. Maybe I'm just getting old, but I've gotten a lot more excited about it, just from the standpoint that, yeah, this isn't the most exciting thing in the world, but we literally keep people alive, we literally feed the world.

Speaker 2: 37:24

I know that's kind of one of those things like, oh, he's listening to the the lobbyist or whatever, but it's true. And when you do look at it, all of a sudden now, with a lot of things that happened around the world, it's no longer one of those things. Were fertilizers in discuss. I mean, when you've got news stations that are talking about fertilizer stocks and you've got all sorts of reports and it's hidden mainline media, this is a very real deal and they come to home for every single person around the world. Yeah, it may not be something everybody dreams of getting into after college, but it's literally something it touches every person out there. So, yeah, right now, and you look at, some of the new technologies are coming on, some of the new things we're looking at. Are each one of these things gonna happen? Of course not. That's just the way market go. But even if a couple of them start to hit, it'd be neat to see the way this changes the marketplace.

Speaker 1: 38:07

Yeah, I'm gonna make these something. There are not that many in quotes. Thought leaders, if they like you go ahead and start talking about it. They're gonna go to you because it's almost my default right.

Speaker 2: 38:16

Well, and that's you know, it's the other folks. I'm not gonna sit there and act like I'm the smartest guy in the space, but a lot of other people are out there trying to. You know trading, they're making money and they don't want to share their information. They don't want to share it. That's again one of the things that makes me unique. I've seen it from a lot of different points of view.

Speaker 2: 38:30

Drew up on a farm. I've seen the fertilizer market from a couple different places and we don't carry a position. But whenever I give my presentation does something I start out with every single time. I do not have a longer short on the physical market. I don't have a longer short on the paper market. I don't even allow myself to trade the fertilizer stocks because I don't want to get a bias in the cut in the industry. If I'm long a nitrogen manufacturer, I'm gonna talk bullish points. So we tried. What we're trying to do is try to stay as unbiased as possible, present the information as it is, not sitting there saying it's this or that, but we at least want to get the information out there for the market to consider.

Speaker 1: 39:05

You mentioned a little bit earlier. But, josh, for those going to track more thoughts, more your work, there's X, but where else you point people?

Speaker 2: 39:11

Yeah, usually it's just go to the stone X website. You can find a lot of stuff there. If you're looking for something, just a little bit of information, just kind of get a recap on a monthly basis. If you go Google stone X farmer fertilizer newsletter, it'll take you to a registration site. I kept it cheap. I did it free for a while because I just want to help people.

Speaker 2: 39:28

And then the company said hey, you're spending company time. We got to keep the lights on. So when talked to my dad I was like, if you're going through a farm show, what price makes sense? He's like ah, 25, 35 bucks a month. So that's what we did. If it's monthly, it's 35. If it's yearly it's 300, which works out to 25. But that's a monthly newsletter. If it's something that they are looking for more in depth, like daily information, reach out to me directly my emails. Josh dot Linville at stone X comm say it's on the website Google me. We try to put stuff on Twitter every day and I know I have some people like why are you doing that? If you're trying to charge on other things, it's sometimes not about the money, sometimes about making some clarity out there. So a few places to find me. But yeah, twitter, I'd say, is a place we put in stuff constantly.

Speaker 1: 40:10

Everybody again. Please make sure you follow Josh, cheer on X, check out stone X as well, and hopefully I'll see you all later. Thank you, josh, appreciate it. You.