Dec. 17, 2010
Higher Fertilizer Costs Expected in 2011
Fertilizer prices on world and domestic markets have had their ups and downs the past couple of years. With strength in grain markets at the end of 2010, fertilizer prices have also shown increases. Let’s look at what’s shaping up for this coming season.
World urea prices have climbed back to levels seen in 2007 before the 2008 price spike (Figure 1). Will we see that pattern repeat this coming year? Probably not, but there will be continued increases as we head into spring.
World producers have increased production as the economy improved and major worldwide grain prices increased. Urea inventories are higher than a year ago and there is optimism over U.S. price prospects from suppliers abroad. Natural gas prices have been relatively flat (Figure 1), so profit margins look favorable for fertilizer producers.
In the past, the cost of natural gas was a primary factor in nitrogen prices, but markets are primarily tying projections to demand based on improved grain prices. Urea prices in the U.S. Gulf area are just over $370 a ton. This reflects a price at the farm of around $530 per ton ($0.57/lb N). USDA found a range of $400 to $520 a ton in Illinois in mid-December. We could see prices move up to $580 by spring ($0.63/lb N) which is approaching prices paid a couple of years ago. Western Nebraska dealer urea prices currently range from $480 to $530 per ton ($0.52/lb N to $0.58/lb N).
There is sufficient N solution on the world market to keep prices flat at this time and imports into the U.S. in October-November were running well ahead of amounts a year ago. It probably is one of the few bargain materials out there, depending on whether your local dealer was able to buy a supply at the lower prices. Nebraska Panhandle prices range from $360 to $410 per ton ($0.56/lb N to $0.64/lb N).
Ammonia prices continue to increase with prices in the central Corn Belt around $625 per ton ($0.38/lb N). That price could move to near $750 per ton ($0.46/lb N) by next April. In the Panhandle, ammonia ranges from $740 to $780 per ton or $0.45/lb N to $0.48/lb N. World demand for fertilizer has recovered from the recession. Shut-downs of ammonia plants in Trinidad, Venezuela, and Russia recently tightened ammonia supply and kept prices increasing.
Phosphate prices for 18-46-0 (DAP) are approaching $600 per ton (Figure 2). DAP prices have continued to increase this fall and Corn Belt prices have ranged from $640 to $710 per ton. U.S. DAP inventory was down at the end of November, with domestic supplies tightening due to strong world demand. Prices could run around $760 this spring at the farm level.
Locally, prices for 11-52-0 (MAP) are comparable to 18-46-0 and are near $750 per ton which translates into a cost of $0.66 per pound of phosphate if you remove the value of the nitrogen in the fertilizer.
Ammonium polyphosphate (10-34-0) is selling at a premium due to high price volatility. Prices in the Nebraska Panhandle range from $600 to $650 per ton which translates into a cost of $0.80 to $0.87 per pound of phosphate if you remove the value of the nitrogen in the fertilizer.
Potash prices continue to rise with average farm level prices at $525 to $600 in the Corn Belt. Potash inventories increased in November in North America, but European manufacturers are raising prices. Farm level prices by spring could be above $730 per ton (Figure 3).
Gary Hergert, Extension Soils Specialist
Panhandle REC, Scottsbluff