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Farmers Encouraged to Plan and Budget for High Fertilizer Prices

Pre-pricing fertilizers in the late fall and winter months when fertilizer prices typically are lower could save farmers money.

Farmers in North Dakota may experience a bit of sticker shock this year as fertilizer prices are the highest in four years, says Bryon Parman, North Dakota State University Extension agricultural finance specialist.

This coming in a year that is experiencing relatively low commodity prices and already razor-thin margins.

DTN surveys fertilizer dealers weekly across the U.S., acquiring retail prices for diammonium phosphate (DAP), monammonium phosphate (MAP), potash, urea, anhydrous ammonia, 10-34-0 (starter), and urea ammonium nitrate (UAN) 28/32. As of May 10, DTN reports that the national average price of urea is $418 per ton, DAP and MAP more than $500 per ton and anhydrous ammonia approaching $600 per ton.

This comes at a time when the U.S. Department of Agriculture is expecting an increase of nearly 1 million acres of corn in North Dakota, which uses more nitrogen fertilizer than most other crops grown in the state, including other small grains and soybeans. The $418 national price tag on urea is the highest it has been since 2015, when the price topped more than $400 per ton.

In 2016, urea was around $390 per ton, 2017 prices hovered around $350 per ton and 2018 prices were closer to $365 per ton during the May planting periods.

“At $418 per ton, and with 920 pounds of nitrogen in a ton of urea, that implies a price of approximately $0.45 per pound of nitrogen,” said Parman. “Compared to last years $0.38 cost per pound, and even with a 30 to 40 pound soybean nitrogen credit, this could cost corn growers in high yielding areas as much as $15 per acre compared to a year ago.”

Parman continues, “In other states with typically larger quantities of corn, planting has begun, albeit behind schedule. The price for urea and anhydrous, in these states, is higher than the national average, for example Nebraska where urea averages $432 per ton and anhydrous is $595 per ton, and Iowa where anhydrous is $622 per ton and urea is $444 per ton.”

While nitrogen and other fertilizers such as MAP ($690 per ton in May 2012) and DAP ($638 per ton May 2012) are nowhere near the 10 year highs seen in 2012, when urea was more than $760 per ton or $0.83 per pound, those high prices came at a time when corn prices were approaching $8 per bushel, soybeans spiked above $15 per bushel and wheat approached $10 per bushel.

“However, there is little producers can do to mitigate fertilizer costs in the short run, as above trend yields over the past several years for wheat, corn, and soybeans have helped navigate consecutive years of lower crop prices,” Parman said. “While many crops have become more efficient with the use of the fertilizers applied, increasing yields have necessitated higher application rates over the years, all but eliminating the option of simply using a lot less.”

The other option producers might use is pre-pricing fertilizers in the late fall and winter months when fertilizer prices typically are lower than they will be during the spring planting season months of March, April and May. While this may result in less flexibility in the months leading up to planting season by farmers who are deciding what crop mix to plant, it can certainly help with planning, budgeting and mitigating, to some extent, price fluctuations in nutrients. However, pre-pricing may be less useful for other nutrients such as DAP and potash as those prices experience a smaller seasonal price swing.

“Nitrogen fertilizer availability and cost, moving forward, will likely be heavily impacted by weather,” Parman concludes. “With most states well behind their five-year average for planting corn, favorable weather may cause prices to spike further, and cause longer waits to get urea as farmers scramble to get their crop in the ground on time. On the other hand, continued planting delays due to wet, cold weather may help hold down prices.”

NDSU Agriculture Communication – May 16, 2019

Source:Bryon Parman, 701-231-8248. bryon.parman@ndsu.edu
Editor:Kelli Anderson, 701-231-6136, kelli.c.anderson@ndsu.edu


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