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Fertilizer Price Outlook: Increases Will Wait
Mar. 4, 2013
Fertilizer prices continue to be strong, but few expect prices to move higher yet this year.
That’s good news for growers who remember watching fertilizer prices double and even triple within just a few months in 2008. Poor world crops and concerns about food shortages prompted some governments to stockpile commodities, pushing many input prices higher as commodity prices soared.
Some analysts are pegging urea at around $545 a ton, a little lower than the national average price of $615 per ton (range of $570 to $680 per ton) estimated by the U.S. Department of Agriculture. Other analysts are predicting potash prices to be down 14 percent with phosphate down 3 percent and urea down 18 percent.
Rob Mikkelsen wanted to spend less time focusing on actual prices and more time talking about how to get the most benefit from a relatively expensive input during his time at the Idaho Hay and Forage Association’s annual meeting. As western region director for the International Plant Nutrition Institute, he knows growers think fertilizer prices are high.
And they are compared to pre-2008 levels. Even though fertilizer prices have softened somewhat as the world’s farmers harvested good crops and commodity prices weakened amid abundance, fertilizer is still priced above 2008 levels.
Mikkelsen said that’s a result of changes in the fertilizer market during the last two decades. Those changes really hit home in 2008 when limited fertilizer supplies pushed up prices and other countries were willing to pay more for it.
As more Chinese people enter the ranks of the middle class, they eat more meat. Producing that meat requires purchasing soybeans primarily from the U.S. and South America. South American soils are naturally infertile but can be extremely productive when the right crop nutrients are added.
American producers are now competing with farmers in South America, China and India for nitrogen, phosphorus and potassium. Africa is also poised to demand more fertilizer.
That much global demand will keep fertilizer prices strong, he said. But increases in supply should help keep prices in check.
Natural gas is the primary source of nitrogen fertilizer but high natural gas prices forced many fertilizer companies to shutter plants.
Now that natural gas production in the U.S. is booming, many companies are re-entering the nitrogen fertilizer market and prices should ease somewhat.
“We think there is a good supply of nitrogen fertilizer coming online,” Mikkelsen said.
After a scare a few years ago when a report indicated that the world would run out of phosphate to make phosphorus fertilizer, other analysts re-worked the estimates and determined phosphate wasn’t as scarce as previously believed. Still, high prices have encouraged companies to open new phosphorus mines and that should also improve supply.
Still, one of the questions that all crop producers are asking themselves is how much will they get back from applying fertilizer.
As long as hay prices remain strong, Mikkelsen believes fertilizing to attain maximum yield is a good investment. The trick, as always, is determining where hay prices are going to be compared to fertilizer prices.
Hay prices in 2013 will largely be driven by supplies, and that depends on whether the Great Plains remains locked in a drought.
But corn prices are another key factor in determining hay prices and the market is pricing this year’s corn crop lower on anticipation that moisture will be adequate.
Mikkelsen knows that many hay growers took a “fertilizer vacation” after 2008 when prices spiked. For growers who had been following a fertilizer program that met crop needs, not fertilizing hay fields for a year or two probably didn’t hurt anything. But growers who had already been skimping on fertilizer saw yields decrease.
He advocates both soil and tissue sampling to determine how much fertilizer to apply.
“The amount of money you can save with a small investment in tissue sampling is great,” he told hay growers. “Don’t skip applying fertilizer if you need it. It’s almost always a good investment.”
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