ISSUE 1 May 1, 2003
FERTILIZER NITROGEN PRICES, WHERE THEY MIGHT GO, AND WHAT SHOULD YOU DO?
At last report, anhydrous ammonia prices to the farm were around $370/ton, or about 23 cents per pound of N. This is not a historic high, but itís high enough to most users. There has been some price reduction within the last month from a March high of about $400/ton. What might the future hold? I would be very surprised if prices didnít drop down to about $280/ton at some time in the early to mid summer, but how fast that happens is not in my crystal ball.
If you look at natural gas prices, the current $5/mmbtu (million metric british thermal unit) would support about a $280 retail price, but because we are in the thick of spring application season all over the US the price has remained high. There is little benevolence in the nitrogen fertilizer industry, because they have frankly taken a bath since 1999 when the natural gas prices first ventured over $3/mmbtu and for the most part have stayed there.
Foreign competition that pays around $1/mmbtu or less for gas in their ammonia production makes it impossible for domestic producers to compete at a profit. Domestic producers only hope is problems with transportation and the resulting spot or regional shortages such as we see, sort of, right now. Because production isnít very profitable domestically, it isnít good business to develop large inventories. And because in February natural gas prices reached $10/mmbtu for a period of time, the resulting sell-off of gas contracts and/or nitrogen production plant closings due to high costs resulted in a shortage of nitrogen right when the spring season started in the south. Itís been catch-up for retail ever since.
Despite possible profits from selling off gas, or higher margins for ammonia in the last two months, most domestic ammonia producers are posting first quarter losses, some sizable. I think spring planting demand will push the prices to be stable for another couple weeks, then gradually back down. Perhaps by side-dress time, ammonia prices may back down to $300. But thatís only a hunch. I am seeing more interest in urea, and particularly UAN (28-0-0) this year than in the past. I think its because although these fertilizers are still higher than anhydrous ammonia, they do not have the historic spread in costs that they have in the past. A few cents per pound more for UAN or urea doesnít seem so bad as the historic six to seven cents per pound difference. As time goes on, it is easier for foreign suppliers to export urea and UAN than anhydrous.
So over the next few years, unless the disparity between domestic and foreign natural gas prices eases, urea and UAN will continue to become more and more competitive (cheap imports vs higher priced domestic product). But regardless of whose brand it is, higher prices will probably result. Farmers can help reduce costs through the following strategies-
- Soil testing. Despite the recommendations to soil test, only a small percentage, probably less than 20% of North Dakota farmers regularly use soil testing. Just the use of soil testing will surprisingly result in better efficiency of fertilizer $ís by producers.
- Better timing of N inputs. Application ammonia/urea later in the fall, and avoiding application on soils with a history of flooding or are sandy.
- Better placement. Shallow placement of ammonia (less than 3 inches deep) probably results in only a 90% efficiency compared to deeper placement. Most farmers would blow their top if charged a 10% surcharge for their N, but some are evidently willing to take a 10% loss for the sake of convenience. There is a lot of direct-seeded acres across the state which have urea broadcast prior/after seeding. This is a gamble which sometimes works and sometimes doesnít. Most lenders would rather that the fertilizer was purchased just once. A better way is to figure out how to place the fertilizer beneath the soil surface, and separate it from the seed.
- Site-specific strategies. Soil testing is the first step. Figuring out which areas of the field need it more than others, factoring in yield potential and then adjusting rates across the field is the next step. This strategy reduces over-fertilized acres and accounts for poor production areas within fields that eat $ís and rarely give them back. North Dakota has over ten years of research that shows that these strategies make sense. There are people in industry who can help farmers make the transition, and itís not very expensive to do so anymore.
- Take full credit for legumes in the system. Just donít apply the same rate of N as you did last year. Consider that rotations are different than ten years ago. Ten years ago, soybeans, field peas and lentils were oddities. Now they are common across the state.
In the rest of my career, I bet I see more $300 ammonia than I will $150. Hopefully, growers will adopt better strategies to increase the efficiency of their fertilizer inputs.
I expect to see more acres of corn and sunflower (in rows) side-dressed than normal due to higher N prices. Side-dress for corn should start when the corn is tall enough that clods do not cover the young plants. Yield decisions do not begin in earnest in corn until about the 9-leaf stage. Usually 5-8 leaf corn is ideal. Corn can physically be side-dressed until the equipment starts snapping off stalks. But its better to apply it earlier than that. Sunflowers can be side-dressed when clod movement danger is past to when they are too tall to physically get through. Usually 6-18 inches is best.
NDSU Extension Soil Specialist
FERTILIZER RECOMMENDATION FOR SUGARBEET
Please note that the current fertilizer recommendations for sugarbeet are the same for the American Crystal Sugar Company, Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative. One-hundred (100) lb/A of soil N plus fertilizer N is needed in the 0-2 foot depth soil profile and 130 lb/A for the 0-4 foot depth soil profile. Sixty-five (65) lb/A of N is required in the 0-2 foot depth soil profile early in the season to maximize crop growth, yield and quality. Apply P and K fertilizer based on your soil test report. Many growers are using starter fertilizer at planting. DO NOT apply more than 5 lb/A of salts (N + K2O) in direct contact with seeds since this will adversely affect emergence and plant stand.
Extension Sugarbeet Specialist