LOW FERTILIZER COSTS HELP PRODUCERS' BOTTOM LINES, EXECS EXPECT PRICE INCREASE
Feb. 21, 2017
Iowa Farmer Today reports:
Fertilizer prices have climbed since hitting recent lows last fall, but prices are still down enough to put a dent in corn production costs compared with a year ago.
Executives at fertilizer companies have been telling investors that rising prices point to higher returns for them in coming months.
For corn planted on the past season's soybean ground, one USDA report showed fertilizer costs at $162 in 2012 is down to $95 in 2016 and projected at $86 for 2017, said Charles Brown, an Iowa State Extension farm management specialist in eastern Iowa.
He said retail urea prices slid from around $400 per ton in January 2016 to $320 in November.
"It has started to trend up now" to around $360 in January, Brown said, and is likely to rise a little more in spring.
Fertilizer company executives have sounded optimistic about strong global demand and rising prices for their products.
Potash Corporation of Saskatchewan, which markets all three major plant nutrients, said the average nitrogen price of $182 per ton it received in the fourth quarter of 2016 had dropped from $288 a year earlier.
PotashCorp execs said they expect some seasonal price strength for nitrogen products, but new U.S. production facilities likely will weigh on domestic prices. They expect potash prices to rise, as farmers replenish soils after last year's record yields.
Mosaic Co., said its average fourth-quarter 2016 diammonium phosphate selling price of $317 per metric ton in the quarter was down from $410 a year ago.
But James O'Rourke, Mosaic president and CEO, told investment analysts Feb. 7, "potash and phosphate prices continue to move up, even through the seasonally-slow time of the year."
He said blend-grade potash prices in North America had gained more than $50 per ton from last year's lows, and New Orleans phosphate base prices were up $35 per metric ton from the December low.
In world markets during the first week of February, prices rose for diammonium phosphate, continued a steep increase for monoammonium phosphate and rose for potash after staying in a range since October, Market Realist reported.
In Iowa, prices for major nitrogen fertilizer products since September reached their lows in early October, according to USDA Market News Service reports. Those reports show statewide cash prices, bulk f.o.b. distributor.
Prices for anhydrous ammonia, urea and 32 percent liquid nitrogen rose to recent highs in late December or early January and weakened a little since then.
Monoammonium phosphate and potash prices reached their recent low in late November, and their recent highs in mid-January, according to the USDA.
For farmers looking to save costs, "You can maybe cut application rates without hurting yield," Brown said. When farm profits were strong several years ago, some farmers built up fertility in their soils and could mine the potash and phosphate in the soil, applying at a replacement rate or less.
For nitrogen application rates, Brown points farmers to the nitrogen rate calculator at http://cnrc.agron.iastate.edu/.
The site is designed for farmers in seven states, from Iowa and Minnesota to Michigan and Ohio.
Users select their state and region, crop rotation, fertilizer price and corn price. The tool generates data and a chart showing returns to various levels of nitrogen applications.
"Probably 115 to 175 pounds is where you get your biggest return," Brown said. "If you go to 200 lbs. per acre, you may increase yield but may not get your money back."