August 15, 2008

The past two years have seen major changes in wheat production costs, especially for fertilizer. Fertilizer is truly an international commodity, so what happens in the Middle East, India, China and former Soviet block countries like the Ukraine influences your local prices.

Nitrogen

Nitrogen prices have almost tripled in the past two years.

Fertilizer is a worldwide commodity and world demand has risen 14% in recent years, primarily due to increased use in South America, China, and India. The U.S. must compete with other buyers, so a weak dollar makes fertilizer more expensive. Because of tight margins and environmental regulations, 25 U.S. ammonia plants have closed since 1999. A few new production facilities are being built in China, the Middle East and the Caribbean. Ethanol demand increases demand for nitrogen because of increased corn acreage. In the U.S., corn uses 45% of all nitrogen fertilizer. Higher energy costs also contribute to increased cost of transporting fertilizer from major ports to inland locations.

Phosphorus

Phosphate prices have almost quadrupled since two years ago with China and India bidding up the market to $1,200/ton for 18-46-0 (DAP). Your local prices will be at least 20% higher than these prices.

Economic BenefitIn spite of higher prices, fertilizer still provides profitability when wheat prices are high. But with such high production costs, producers need to manage well. In an Aug. 7 CropWatch article, UNL Ag Economics Paul Burgener noted that breakeven costs for producing wheat are now approaching $7/bu. As you plan for 2009, fertilizer prices will be considerably higher than in 2008. The key to maintaining profitability is to know your soil test levels and do the best job of fertilizer application to enhance efficiency.

Controlling Production Costs

While you can't control fertilizer prices — other than being aware of world trends and locking in a good deal when you find one — and you can't control commodity prices, you can control production inputs and costs by improving management.

• Soil testing is more important than ever. See these UNL Extension publications for Nebraska's soil sampling guidelines:
  • Guidelines for Soil Sampling
  • Soil Sampling for Precision Agriculture 
• Deep sampling for residual nitrate-N is essential. Make sure you credit all N sources and apply for maximum efficiency. Collect soil samples to at least a three or four foot depth. Suggest sampling increments are 0 to 8 inches, 8 to 24, and 24 to 48.

•  

• For phosphorus, row application is twice as efficient as broadcast. With phosphorus prices for 10-34-0 approaching $1.35 per pound of phosphate, efficiency is important. Row-application or dual placement of P with ammonia is more efficient than broadcasting.

•  

• Concentrate on nitrogen and phosphorus. Most Nebraska soils contain sufficient levels of potassium, magnesium, manganese, iron, and sulfur for wheat production. If zinc levels are less than 0.5 ppm (DTPA), you may want to include 0.5 to 1 lb/ac of zinc in row-applied fertilizer or broadcast apply zinc sulfate to supply 5 lb of actual zinc per acre.

•  

• Not all fertilizer recommendations are the same. University fertilizer recommendations tend to be lower than those suggested by many commercial labs. Land grant university fertilizer recommendations are based on research and on-farm verification and have been proven to provide sufficient nutrient levels for producing both high yield and high quality.

•  

• Consider replicated strip trials to determine the effect of lower or higher fertilizer rates on yield and quality. Doing your own test plots takes time, but the payoff is knowing how recommendations work on your fields and farm.

•  

• Manure is valuable. Manure is an excellent nutrient source for nitrogen, phosphorus, and micronutrients (zinc and iron), but applying low rates (4-5 ton/ac) for wheat can be a challenge. Manure and compost should always be tested for nutrient content. The old "ball park" figure of 10 lb nitrogen and 5 lb phosphate per ton can be inaccurate for today's manure produced with corn by-products. Nitrogen availability in manure and compost varies because nitrogen must be converted from organic to usable inorganic forms.

•  

• Comparison shop. Look at different products and do some "fertilizer arithmetic" to compare the actual cost per pound of nutrients, especially mixed grade fertilizers. Work with a reputable dealer who can provide accurate estimates, timely delivery and well-maintained equipment. Remember, service after the sale is also important.

•  

• Seek unbiased information. Look to Extension educators and specialists for unbiased, research-based information. 

Following these suggestions can help keep wheat production profitable in 2009.

Gary W. Hergert
Soils Specialist
Panhandle REC, Scottsbluff