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Jul. 20, 2022 by Gary Schnitkey, Krista Swanson, Nick Paulson, Jonathan Coppess and Jim Baltz, Department of Agricultural and Consumer Economics, University of Illinois; and Carl Zulauf Department of Agricultural, Environmental and Development Economics, Ohio State University Farmers will face much higher fertilizer prices to begin the 2023 planning season. For 2022, farmers who purchased fertilizer early had much lower fertilizer costs than those who purchased later as prices increased. The same increasing trajectory may not occur this year, and prices could be lower next spring. Farmers purchasing fertilizer early may wish to price a portion of corn production to cover costs. Splitting nitrogen fertilizer applications also is a risk management strategy. Farmers planning on any post-planting nitrogen application may wish to mitigate risks by purchasing Post Application Coverage Endorsement (PACE), a crop insurance product that compensates for losses when nitrogen cannot be applied after planting (farmdoc daily, January 18, 2022). Current Fertilizer Prices According to the Agricultural Marketing Service (AMS), fertilizer prices on July 14, 2022, were $1,469 per ton for anhydrous ammonia, $983 per ton for diammonium phosphate (DAP), and $862 per ton for potash. Overall, July 2022 prices are much higher than year-earlier levels (see Figure 1).
Anhydrous ammonia prices have increased from $726 per ton on July 15, 2021, to 1,469 per ton on July 14, 2022, an increase of $743 per ton. DAP has increased from $688 per ton to $983, an increase of $295 per ton. Potash has risen from $481 per ton to $862, an increase of $381. Much of the increase in fertilizer prices occurred before the onset of actual fighting in Ukraine in February. At the end of January 2022, anhydrous ammonia prices were $1,497 per ton. Ammonia prices then rose by a relatively modest amount, reaching a high point of $1,636 per ton on June 2. Prices then declined to $1,469 per ton on July 14, falling slightly lower than the pre-invasion January 2022 month-end price. DAP and potash remain slightly higher than January 2022, but as with anhydrous ammonia, a majority of the increase came before the Russian invasion in Ukraine. For 2022 production, farmers who purchased early had much lower fertilizer prices than those who purchased later in the season (fall 2021 to spring 2022). For example, anhydrous ammonia could have been purchased in the $700 to $800 per ton range in the late summer/early fall of 2021. Those prices then rose continually, reaching almost $1,500 per ton by the end of the year and remained about $1,400 per ton throughout the spring. This year, farmers will not have the opportunity to purchase fertilizers at the comparatively lower prices of late summer 2021. Fertilizer Outlook Since the Ukraine-Russia conflict began, fertilizer prices have stabilized or declined slightly, and fertilizer supplies in the western hemisphere appear to be adequate. Like fertilizer, grain markets also have stabilized. For example, prices on the December 2022 corn contract and November 2022 soybean contract on the Chicago Mercantile Exchange (CME) rose after the Russian-Ukraine conflict and now, in July, have reached levels similar to those before the conflict. Overall, markets appear to have absorbed the impacts of the Ukraine-Russia conflict. To read the entire article click here. Tweet |
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