U.S. prices of fertilizer nutrients began to rise steadily in 2002 and increased sharply to historic highs in 2008 due to the combined effects of a number of domestic and global long- and short-run supply and demand factors. From 2007 to 2008, spring nitrogen prices increased by a third, phosphate prices nearly doubled, and potash prices doubled.
The price spike in 2008 reflects low inventories at the beginning of 2008 combined with the inability of the U.S. fertilizer industry to quickly adjust to surging demand or sharp declines in international supply. Declining fertilizer demand, disruption in fall applications, increased fertilizer imports (July to August), and tightening credit markets for fertilizer purchases contributed to the decline of fertilizer prices in late 2008.
The prospect for strong fertilizer demand in early 2009, high raw material costs for the manufacture of fertilizers, production cutbacks, and decreasing supplies from fertilizer imports, however, could put upward pressure on U.S. fertilizer prices in spring 2009.
Click here for a more complete report from USDA-ERS.
Saturday, February 21, 2009
Fertilizer Price Volatility
Stimulus for Small Business?
The following are some of the major provisions of the stimulus package of interest to small business, according to Small Business Legislative Council, The Associated Press and other sources: A summary of the key provisions in the stimulus package is available from the Senate Finance and House Ways and Means committees. Hat Tip to SAF E-Brief
Monday, February 16, 2009
It could be a lot worse. It Sunday, February 15, 2009
Marketing during a recession
How should your marketing change because of the recession? Harvard professor John Quelch has eight tips for Marketing Your Way Through a Recession:
1. Research the customer. Instead of cutting the marketing budget, you need to know more than ever how consumers are redefining value and responding to the recession. Price elasticity curves are changing. Consumers take more time searching for durable goods and negotiate harder at the point of sale. They are more willing to postpone purchases, trade down, or buy less. Must-have features of yesterday are today's can-live-withouts. Trusted brands are especially valued and they can still launch new products successfully, but interest in new brands and new categories fades. Conspicuous consumption becomes less prevalent.
2. Focus on family values. When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure, and rugged individualism. Zany humor and appeals on the basis of fear are out. Greeting card sales, telephone use, and discretionary spending on home furnishings and home entertainment will hold up well, as uncertainty prompts us to stay at home but also stay connected with family and friends.
3. Maintain marketing spending. This is not the time to cut marketing. It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the reassurance of known brands, and more consumers at home watching television can deliver higher than expected audiences at lower cost-per-thousand impressions. Brands with deep pockets may be able to negotiate favorable advertising rates and lock them in for several years. If you have to cut marketing spending, try to maintain the frequency by shifting from more expensive forms to less expensive forms, such as the use of direct marketing, which gives more immediate sales impact.
4. Adjust product portfolios. Marketers must reforecast demand for each item in their product lines as consumers trade down to models that stress good value, such as cars with fewer options. Tough times favor multi-purpose goods over specialized products, and weaker items in product lines should be pruned. In grocery-products categories, good-quality own-brands gain at the expense of national brands. Industrial customers prefer to see products and services unbundled and priced separately. Gimmicks are out; reliability, durability, safety, and performance are in. New products, especially those that address the new consumer reality and thereby put pressure on competitors, should still be introduced, but advertising should stress superior price performance, not corporate image.
5. Support distributors. In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy allowances, extended financing, and generous return policies motivate distributors to stock your full product line. This is particularly true with unproven new products. Be careful about expanding distribution to lower-priced channels; doing so can jeopardize existing relationships and your brand image. However, now may be the time to drop your weaker distributors and upgrade your sales force by recruiting those sacked by other companies.
6. Adjust pricing tactics. Customers will be shopping around for the best deals. You do not necessarily have to cut list prices, but you may need to offer more temporary price promotions, reduce thresholds for quantity discounts, extend credit to long-standing customers, and price smaller pack sizes more aggressively.
7. Stress market share. In all but a few technology categories where growth prospects are strong, companies are in a battle for market share and, in some cases, survival. Knowing your cost structure can ensure that any cuts or consolidation initiatives will save the most money with minimum customer impact. Companies such as Wal-Mart and Southwest Airlines, with strong positions and the most productive cost structures in their industries, can expect to gain market share. Other companies with healthy balance sheets can do so by acquiring weak competitors.
8. Emphasize core values. Although most companies are making employees redundant, chief executives can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners, and servicing existing customers rather than trying to be all things to all people. CEOs must spend more time with customers and employees. Economic recession can elevate the importance of the finance director's balance sheet over the marketing manager's income statement. Managing working capital can easily dominate managing customer relationships. CEOs must counter this. Successful companies do not abandon their marketing strategies in a recession; they adapt them.
Let me add to his wise remarks my own thoughts:
The biggest changes in market share occur at economic turning points.
I don't have data to back up this claim, but I believe it. Consider two scenarios:
A firm decided to downsize the sales staff during the recession. The remaining sales people became order-takers, answering calls from repeat customers. They had little time for outbound calls, and when they did call on new prospects or former customers, they had little success. So they stopped trying.
At the same time, a competitor had some (probably young) sales people, too new or too stupid to realize that nobody buys in a recession. They made the sales calls. They followed up a month later. They stayed in touch with their prospects and former customers.
When the economy turned around, who do you think got the business?
Saturday, February 14, 2009
Conflicting consumer confidence reported for January
Two separate indexes are maintained regarding consumer confidence. One is reported by the Reuters/University of Michigan Surveys of Consumers and the other by the Conference Board.
The Conference Board Consumer Confidence Index™, which had decreased in December, inched lower in January and continues to be at a historic low. The Index now stands at 37.7 (1985=100), down from 38.6 in December. The Present Situation Index declined slightly to 29.9 from 30.2 last month. The Expectations Index decreased moderately to 43.0 from 44.2.
HOWEVER, the University of Michigan Index of Consumer Sentiment was 61.2 in the January 2009 survey, just above the 60.1 in December but substantially below last January’s 78.4 and the cyclical peak of 96.9 set in January 2007 (what a difference a couple of years makes!). Presidential honeymoons have typically translated optimistic expectations for policy changes into early gains in consumer confidence, and the recent surveys indicate a small gain since the November low of 55.3. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 57.8 in January, just ahead of the 54.0 in December and well below last January’s 68.1and the January 2007 cyclical peak of 87.6.
Regardless of your index of choice, consumers are not optimistic heading into spring. That's why our flowers, plants, and trees are so important in terms of being the antidote for the doom and gloom. Sooner or later, the money from increased saving is going to start burning a hole in people's pockets and we need to be ready when it does!
Friday, February 13, 2009
What goes up must come down and back up again
U.S. prices of fertilizer nutrients began to rise steadily in 2002 and increased sharply to historic highs in 2008 due to the combined effects of a number of domestic and global long- and shortrun supply and demand factors. From 2007 to 2008, spring nitrogen prices increased by a third, phosphate prices nearly doubled, and potash prices doubled. The price spike in 2008 reflects low inventories at the beginning of 2008 combined with the inability of the U.S. fertilizer industry to quickly adjust to surging demand or sharp declines in international supply. Declining fertilizer demand, disruption in fall applications, increased fertilizer imports (July to August), and tightening credit markets for fertilizer purchases contributed to the decline of fertilizer prices in late 2008. The prospect for strong fertilizer demand in early 2009, high raw material costs for the manufacture of fertilizers, production cutbacks, and decreasing supplies from fertilizer imports, however, could put upward pressure on U.S. fertilizer prices in spring 2009.
Thursday, February 12, 2009
January retail sales up 1%
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $344.6 billion, an increase of 1.0 percent (±0.5%) from the previous month, but 9.7 percent (±0.7%) below January 2008. Total sales for the November 2008 through January 2009 period were down 9.5 percent (±0.5%) from the same period a year ago. The November to December 2008 percent change was revised from –2.7 percent (±0.5%) to –3.0 percent (±0.2%). Retail trade sales were up 1.1 percent (±0.7%) from December 2008, but were 11.0 percent (±0.7%) below last year.
A statistical mirage? Many pundits think so -- click here.
Some good news on the housing front
Foreclosure filings dropped 9.6% from December, RealtyTrac reports, largely due to the combined mitigation efforts of banks and the government - but remain 18% higher than a year ago. In January, one in every 466 houses was the subject of a foreclosure filing. Yesterday, Foreclosures.com said completed foreclosures plunged by more than 25% in January from December, to 72,694 from 97,841. Preforeclosure filings - an indicator of future completed foreclosures - also fell 12%. "Efforts last year by government and industry to lay the groundwork for housing recovery finally are yielding the hoped-for slowdown in the foreclosure hemorrhage," Foreclosure.com president Alexis McGee said.
The new New Deal
The House and the Senate have drafted a compromise stimulus bill totalling $789.5B, all but guaranteeing the largest economic rescue program since Roosevelt's New Deal. Obama hailed the "endeavor of enormous scope and scale," though it may turn out to be just a down payment on efforts to turn around the economy. The package, which exceeds the cost of the entire Iraq war since the 2003 invasion, will expand unemployment insurance, streamline health-care delivery, give Washington more control over local education spending and tilt federal assistance to the poor. Around 35% of the package is earmarked for tax cuts. Obama and Democratic leaders lowered their expectations for job creation to 3.5M from 4M. Both chambers could approve the compromise bill by the end of the week.
Saturday, February 7, 2009
Thursday, February 5, 2009
Light at the end of a long tunnel
If you noticed, I started a new poll that will last during the spring season. It appears on the right side of this page and asks about monthly sales compared to this time last year. Feel free to participate each month so that we can gauge how we are progressing through the season. Vote once, but not often!
Also, the latest from Bill Conerly...see below.
Monday, February 2, 2009
Cool tool: State by state economic indicators
CNN-Money has a cool interactive map showing economic indicators for the 50 states. It demonstrates some of the points I have made in earlier posts about the recessionary effects not being felt equally across the country.
