April 10, 2009

Figure 1. Urea and natural gas prices. Source: Fertilizerworks.com: Basket Price (Links to larger version.)

Figure 2. Anhydrous ammonia prices f.o.b. U.S. Corn Belt. Source: GreenMarkets & Cleveland Research Company (Links to larger version.)

Figure 3. 18-46-0 prices in early April f.o.b. Central Florida.Source: GreenMarkets & Cleveland Research Company (Links to larger version.)

Fertilizer prices increased dramatically then decreased during the past two years, with many producers delaying fertilizer purchases in hope that costs would continue to drop.

However, many dealers locked in costs last summer, so price decreases have lagged until they can sell current inventory. To better understand future price trends, it's helpful to examine world and port prices for fertilizer.

Nitrogen

Nitrogen prices tripled compared to two years ago, but world prices have dropped to early 2007 levels. Urea is a good example (Figure 1). World demand for fertilizer has softened due to the world-wide economic downturn. Natural gas costs have also decreased dramatically (Figure 1) which has allowed some producers (Yara, Mosaic, Agrium) to restart ammonia production for nitrogen and ammonium phosphate fertilizers.

Historically, the price of ammonia is strongly correlated with natural gas prices because 85-90% of the production cost of ammonia is natural gas. Urea prices on the world market and f.o.b. prices on the US Gulf are now near $310 per ton. Anhydrous ammonia prices f.o.b. the Corn Belt also have declined (Figure 2). International tenders for 32-0-0 (UAN) are under $200 per ton.

This is good news for crop producers as they look at decreased grain prices for corn and wheat compared to a year ago. Fertilizer is still a good investment and lower prices help improve profitability, especially if you can buy lower cost N for sidedress application for corn or later summer application for wheat.

Phosphorus

Phosphate prices also have seen major declines (Figure 3). US and international fertilizer manufacturers are still producing 18-46-0 (DAP) and 11-52-0 (MAP) because of lower natural gas prices and lower super phosphoric acid costs, so product availability should not be a problem. Prices are just above $300 per ton. Information on 10-34-0 production and costs is difficult to find.

Despite Higher Costs, Fertilizer Valuable 

As you plan for 2009, fertilizer prices should be decreasing and will be lower than in 2008. International and f.o.b. prices need to be watched, but you also need to know what's going on locally. Following the basic agronomic practices of soil testing, proper fertilizer placement and timing, and using cost-effective sources still makes fertilizer a good investment.

For more information check our Web site to develop fertilizer recommendations based on UNL criteria (http://soiltest.unl.edu.)
Gary Hergert, Soils Specialist
Panhandle REC, Scottsbluff