Fertilizer: Where are we headed for 2013?

By Marc Peters

As your cooperative partner/supplier, we hear this question as often as our grain department hears, “where is the corn price headed?” As your retailer, we cannot predict with precision where the market will go. However, our market opinion in the short-term is that prices will continue tracking higher. Led by Anhydrous Ammonia, nitrogen values have climbed quickly since June and have stayed firm. Ammonia production and pipeline capacity is stretched as always, so supplies for this fall are very tight. As we question whether fall application will actually work due to dry, hard soil conditions, the industry questions “will we get NH3 to the fertilizer plants fast enough?” We must be aware that locations in the eastern U.S. have been getting ample rainfall which will allow fall movement of nitrogen fertilizers. Therefore, prices do not need to go down – even if we have a challenging environment for fall application that reduces local demand for nitrogen fertilizers.

On phosphates, production capacity and transportation will present issues on all phosphorus fertilizers. Both dry and liquid phosphates are currently priced slightly lower than one year ago. We expect strong demand will continue to keep phosphorus prices firm. Low river levels due to drought greatly impact all dry fertilizer availability, as traffic on both the Mississippi and Missouri rivers is limited; so supply will be decreasing as well.

Remember, $6.00 per bushel prices for the 2013 corn crop will draw a lot of acres to be planted next spring. There will be very few reasons for prices to go down. Looking at fertilizer economics for 2013 based on a 215 BPA corn crop, your total N and P cost as a percent of gross revenue is just under 12 percent. Another way to look at it: you can cover your 2013 N and P fertilizer costs by selling only 25.5 bushels of corn per acre.

At current fertilizer and corn prices, given a 50 lb. actual P application and 200 lbs. of actual N plus a typical starter application, your total fertilizer costs are 12.8 percent of expected gross revenue for 2013 compared to 15 percent one year ago. By locking in fertilizer prices and a few bushels of corn production, your return per acre is higher than it was at this time last year!

Soil Sampling Variability: Even though the crops have been harvested for this year, Mother Nature has thrown yet another curve into the mix. The UFC crew has been hard at work getting soil samples pulled for the upcoming year and results are flowing back in. We have noticed that some, not all, of the results are coming back with high readings. This is nothing to be overly concerned about. Results will fluctuate year to year no matter which testing laboratory is used due to environmental conditions and when the samples are pulled. We have looked at the last two years worth of samples on a good number of fields and found that there are swings in the numbers every year, but this year it is more pronounced due to the drought conditions we endured for the 2012 growing season.

We have been in contact with several different labs and found that everybody was having the same problems with high results. Basically, the quality of the samples due to the lack of moisture and the hardness of the soil profile is the main culprit. Bulk density, plant nutrient uptake, soil texture and water infiltration all play a huge role in how the results come back to us. This was most evident on samples that were pulled early – right behind the combine. Since we received some moisture the last couple of weeks, sample quality has improved and the results are starting to fall into line. Every year is different and 2013 is going to start off the same way. With the help of your local FSA, we can work through these concerns to produce a solid crop plan for a successful 2013 crop.