Tuesday, December 16, 2008

Fertilizer prices suddenly collapse in late 2008

The International Center for Soil Fertility (IFDC) reports that, with the exception of potash, world fertilizer prices have dropped dramatically.


Gregory explains why fertilizer prices fell so rapidly in late 2008. "The high fertilizer prices caused 'demand destruction.' Farmers were unable or unwilling to pay two or three times the prices of early 2007." Collapse of the global credit market, a trade recession, and slowdown in world economic growth worsened the situation. Demand for fertilizers fell and stocks accumulated. Fertilizer manufacturers cut back on production.

"But potash prices have stayed high due to its shortage and difficulties in transporting Russian potash because of an enormous and expanding sinkhole near the Silvinit mines," Gregory says. "Demand for potash increased from 2006 through 2008, and potash inventories are now 37% lower than over the past 5 years."

A couple of thoughts I will be researching.

First, if lower demand has translated to lower utilization, this should show up as reduced inventories of 2008 commodity crops, like rice, soybeans, and wheat, and reduced supply of perishable fruit crops like bananas.

Second, with fertilizer prices now low, this would be a excellent time to replenish African soil fertility, currently in crisis. Especially in consideration of a possible reduction in 2009 food inventories world wide.

(recycled from nscss.org)

7 comments:

John said...

Hi Phil:
Sorry this is off topic. I need to prepare for the possibility of downsizing, i.e., I may need to go out on my own as a consultant. Can you steer me to some quality info about E & O insurance and other aspects of setting up a hole-in-the wall consulting business?

Philip Small said...

John:
I'll see what I can dig up as far as available guidance.

In my experience, E&O is now fairly easy to find if you are in a recognized industry, Otherwise the sweet spot is a group rate negotiated by a professional trade organization. The risk with E&O is that you fall prey to purported E&O that actually GL with a rider to cover an element of E&O. A recent example that crossed my desk: “money damages” for failure to render a professional service.

Good E&O includes a duty to defend policy, which means the insurer will pay the legal cost of defending you regardless of any actual damages that you client may incur.

The cost on that is low, and if that's exactly what you had in mind, OK, but as a GL rider, there may have to be actual Bodily Injury or Property Damage to trigger coverage of any kind including the Professional Liability.

Frankly, I suspect this type of policy is not intended to provide actual E&O coverage, but is made available to be used in an unethical way by contractors to meet client requirements to be named on a $1M-plus E&O policy. This "solution" starts <$500, the real E&O starts at >$1K and used to be >$6K. The honest alternative to using false-front E&O is to save your $$ and ask that an exception be made in your case. If you are in an uncovered niche service sector (like soil science consulting was at one time) your value to the client normally exceeds the client's pro forma need for coverage. Before my professional organization negotiated group E&O that's what I did, and a pain to deal with that way, but I never lost any work because of it.

To be continued with what E&O should cover.

Philip Small said...

(continued)

As mentioned above, good E&O includes a duty to defend policy, which means the insurer will pay the legal cost of defending you regardless of any actual damages that you client may incur. If its note stated, you don't have it.

Good E&O covers defense cost for allegations of intentional, dishonest or fraudulent acts. Alleged - not actual - is a huge and appropriate distinction.

It should specifically provide coverage for all directors, officers, partners and spouses and for the subcontractors you use, all of whom are likely to be named in an E&O claim.

Exceptionally good E&O provides full prior acts coverage.

I go for high deductible, and encourage others in my group to do the same. The risk awarenwss inherent with a high deductible encourages us to have a strong and clear contractual relationships with our clients. No handshake understandings.

The contract is how you manage exposure to professional liability claims. A "real" E&O insurer will want to see your contract and will be looking for specific contracted elements.

If a client insists on using their contract, I have them attach my contract as evidence of my standard practices:

1) Represent to the contract owner that I am authorized to do business in that state.

2) Services provided are based on access to property and information provided by the Owner.

3) Owner to disclose all newly discovered information.

4) No work outside the scope of work or agreed costs without authorization.

5)Contractor responsible for methods used.

6)Contractor warrants good workmanship. Beyond that, services performed are without warranty. Liability of Contractor limited in amount to fees paid.

7)Agree to arbitration.

I also have a language on what professional standards I adhere to, holding eachother harmless, me withdrawing scheduling priority if client falls behind on payment, me paying my bills on time to avoid liens being placed on my client's property, and how we get out of the contract.

What you need to have in your contract will vary by state and service sector. Use a lawyer.

John F. said...

Hi Phil:
Thanks for all the info. It sounds a little complicated and one may never know how well they're actually covered.

I know of a now-defunct consulting company that was sued after missing a wetland during a snow-covered delineation for a new subdivision. The dummies wouldn't have missed it if they'd looked at the county soil survey. There was a patch of Histosol (Houghton muck) mapped where the wetland was missed.

After developing site plans with engineering drawings, and getting notice from the state about the missed wetland, the developer sued the consultant for an amount they believed the lots were worth if they'd been buildable.

Story goes, the E & O insurance company refused to pay. The consultant had to hire an attorney to go after the insurance company. As I understand it, the insurance company finally paid but the attorney fees, some 12 grand, were not reimbursed.

I got the info second hand so am not entirely sure of the details. Sounds plausible.

Thanks again.

Philip Small said...

It does sound plausible.

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