Fertiliser Prices Down Compared To Previous Years

US - Farmers are benefiting from lower and more stable fertiliSer prices this spring, according to a Purdue University expert.
calendar icon 29 April 2010
clock icon 2 minute read

"Fertiliser prices have come down substantially in the last year," Purdue agricultural economist Alan Miller said. "This has had a substantial impact on crop input margins since fertilisers comprise a large portion of those costs."

According to the US Department of Agriculture's National Agricultural Statistics Service for the North Central region, between April 2009 and April 2010 fertiliser prices for anhydrous ammonia have dropped by $250 per ton, potassium is down $350 per ton and phosphate is down $50 per ton.

When ethanol production in the United States really took hold in late 2006 and early 2007, it corresponded to booming economic growth and strong demand for crops and energy worldwide. As a result, fertiliser prices rose dramatically.

"Volatile fertiliser prices are difficult for both farmers and agricultural suppliers because it's not always easy to manage that risk," said Bruce Erickson, director of cropping systems management at Purdue. "Fertilisers are not traded publicly on an exchange like grains, energy or stock in a company."

The worldwide financial crisis added to much lower, more stable fertiliser prices because of weaker worldwide fertiliser demand.

"Fertiliser prices bottomed out last fall and have increased relatively little since then," Mr Erickson said. "As the price of nitrogen drops relative to the price of corn, the economically optimal amount of nitrogen fertiliser increases. As a result, farmers that may have cut back on fertiliser rates in recent years due to previously higher prices may be feeling a bit more comfortable with their normal programme."

The overall supply of anhydrous ammonia available in the United States is expected to be large enough to keep prices in check, but the capacity of the delivery infrastructure has been stretched in some places this spring.

The wet and late 2009 harvest meant less fertiliser went on the fields last fall, and with the early start this spring the distribution system has been tested, Mr Miller said.

Natural gas is used as a feedstock for producing anhydrous ammonia fertiliser, so low natural gas prices also have contributed to more stable fertiliser costs.

"Natural gas prices are low enough currently to give US fertiliser producers a cost advantage for converting natural gas to anhydrous ammonia relative to some of the countries from which we had previously been importing nitrogen," Mr Miller said.

In the past several years US producers of ammonia fertilisers were at a cost disadvantage relative to other suppliers around the world, and, as a result, more of the nitrogen fertiliser used in the United States has been imported.

"It is very possible we will see a decline in nitrogen imports in favor of more production here in the US," Mr Miller said.

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