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Fertilizer Price Forecasted to be Lower In 2014
Nov. 8, 2013
Farmers should anticipate seeing a significantly lower fertilizer bill for 2014 than for other recent cropping years, say industry analysts. Just how low that cost might be will depend greatly on how well farmers can time both their purchases and applications, particularly for nitrogen, the analysts point out.
“It’s looking like a much better year than last year to price fertilizer for both fall and spring applications,” says Chad Hart, an Iowa State University agricultural economist. “We’re seeing significant cuts in fertilizer prices for N, phosphate and potash compared to this time last year. As a result, farmers can expect to see sizable reductions in fertilizer costs for 2014, especially when making purchases this fall.”
A farmer in a corn-soybean rotation should expect to pay about 20% less for fertilizer in 2014 than in 2013, according to budget estimates from Purdue University. “In 2014, our ballpark estimate for farmers to fertilize their corn crop on average-productivity soil in Indiana is around $138/acre,” says Bruce Erickson, agronomy education distance and outreach director at Purdue. “Last year, our estimate was $176/acre, so that is $38/acre less to fertilize corn in 2014 than 2013.”
Unanticipated world events may cause Purdue’s estimates to change, but current fertilizer prices could be a boon to farmers who need to rectify soil-nutrient deficiencies, says Erickson, who also serves as agronomic education manager for the American Society of Agronomy.
“For the 2014 crop, our numbers are based on ammonia at 42 cents/lb., phosphate at 50 cents/lb. and potash at 41 cents/lb.,” he says. “If good weather holds this fall, the lower prices we’re seeing right now would present a good opportunity to replenish any soil fertility needs that may have been put off for a while. Fertilizer applications were down in 2012, due to a wet fall in the eastern Corn Belt and extreme drought in the western Corn Belt.”
Wet conditions also deterred or delayed fertilizer applications for much of the Midwest earlier this year, notes Hart. “My guess is that a lot of farmers will be chomping at the bit to apply fertilizer this fall,” he says, “because of all the application problems they had this spring.”
N application investments
Despite additional time-management challenges, N applications tend to be more profitable if done during spring. “With N fertilizer, spring applications are the best bang for your buck,” says Hart. “The best uptake of N with the least waste occurs when applications are made in spring rather than fall.”
N application investments
Despite additional time-management challenges, N applications tend to be more profitable if done during spring. “With N fertilizer, spring applications are the best bang for your buck,” says Hart. “The best uptake of N with the least waste occurs when applications are made in spring rather than fall.”
Farmers might consider using high-clearance sprayers and other new equipment technologies that enable them to extend N applications over a longer period during spring than with standard sidedress equipment, says Vince Reincke, marketing manager at Strategic Farm Marketing, Hillsboro, Ill. “Producers need to look at ways to stay flexible in timing their applications without losing their pricing flexibility,” he says. “To do that, farmers might also consider adding storage facilities for their N needs.”
Flexibility, efficiency and price are all important considerations when making purchase decisions, adds Reincke, who grows corn, soybeans and wheat, in addition to being a licensed commodity broker and crop insurance agent. “Anhydrous is consistently cheaper on a per-unit basis, but the timing for it is generally less flexible than other sidedress N products,” he says. “So, many farmers are moving to a liquid-N application, even though it is more expensive than anhydrous, because it’s easier and safer to store, handle and apply.”
According to USDA data on annual fertilizer use, anhydrous ammonia applications in the U.S. have been steady with a slight downward trend over the last 30 years, points out Erickson. In comparison, both urea and liquid-N solution have shown a recent upward trend in use, he says.
Farmers who act soon could lock in a good price for N fertilizer products, whether or not they intend to apply them right away, notes Hart. “The current low fertilizer prices this fall offer a good pricing opportunity, even if farmers plan to apply the product in the spring,” he says. “If you wait until spring to purchase fertilizer, prices might move against you, and supply might also move against you.”
Industry analyst Kevin Van Trump, Farm Direction CEO, Raymore, Mo., concurs. “We’re telling our clients to call around to suppliers and compare pricing for this year, and also look at what you paid in previous years,” he says. “Right now, nitrogen prices are down to where we haven’t seen them since 2009.”
Postharvest price hike
Van Trump says he doesn’t want to see farmers lose out on low prices while they are still available. “We’re advising clients to lock in fertilizer prices now, just in case there’s a rebound in demand,” he says. “If there’s still a chance to lock in some $5 corn, then that would help shore up some downside risk. Once the fertilizer price is locked in, that will help put a floor in place for grain prices.”
This year, some farmers may encounter an insurance guarantee that is below their price of production, adds Van Trump. “There’s a good possibility we’ll see a sub-$4.50 corn price range in 2014, along with fertilizer prices that bounce back to the higher side,” he says. “So, the risk is on the upside right now — the downside potential for fertilizer prices is somewhat limited.”
A seasonal low for fertilizer prices typically occurs just prior to harvest, says Reincke. “The best time to buy is generally a little before the fall spreading season begins,” he says. “However, farmers also need to be conscious of offsetting any risk by selling some commodities near the time of purchase to cover their purchase cost.”
Fertilizer prices might come down a little bit more, but not much more than they are now, predicts Hart. “The tendency is that when prices get really low, China and others will move in and make a large purchase, which increases prices somewhat afterward,” he says. “Another possible big threat to higher prices would be any more escalation of tensions in the Middle East.”
If Middle East violence breaks out again, it would likely “restrict some supplies and make markets tighter and prices higher,” says Hart. “It would have the biggest impact on potash, but it could negatively impact N supplies as well, particularly if shipping lanes in the region get backed up.”
However, for now, “there’s plenty of fertilizer available,” Hart adds.
Source: Farm Industry News
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