Planning for next growing season begins with penciling out likely financial scenarios. This activity should include estimates on how much corn and soybean growers should assume fertilizers will cost. Unfortunately, growers should plan for fertilizer to cost more than it did in 2018. This piece will explore the recent fertilizer market direction, experts opinions on the likely market direction in 2019, and what impact it will have on grower input costs in 2019.
Recent Fertilizer Prices Move Higher
Dan Quinn of DTN/PF recently reported on “DTN Retail Fertilizer Trends”, noting that all fertilizers moved higher in the third week of September. This was in addition to a notable upward swing over the previous several weeks. Also, Quinn’s piece includes a 8-year price chart for retail anhydrous. Quinn highlights that retail anhydrous is up 23% from this time a year ago.
Overall all all eight fertilizer prices Quinn follows having been tracking higher.
In the U.S., all eight of the major fertilizers are now higher compared to last year with prices shifting higher in recent months. Potash is 5% higher, 10-34-0 is 8% more expensive, UAN32 is 12% higher, UAN28 is 13% more expensive, both MAP and DAP are now 15% higher and both anhydrous and urea are now 23% more expensive compared to last year.
Bryce Knorr of Farm Futures is also tracking fertilizer price trends in his article titled, “Fertilzer Outlook – Iran Sanctions Unnerve Fertilizer Market”. Along with Quinn, Knorr has noticed that the fertilizer market has already rallied to multi-year highs with international forces coming into play.
Specifically, Knorr shares how India may have trouble paying Iran for Urea due to U.S. financial sanctions. The oil market has experienced similar challenges. The inability to pay and thus source this material, acts as a squeeze on supply, therefore driving prices higher.
Quinn also mentions an international factor, this one from China. Specifically, China’s “fertilizer production is on the decline, according to Rabobank’s September China Food & Agribusiness Monthly report.” Again with less supply, comes higher prices.
Knorr offers analysis on this list fertilizers:
- Ammonia – October contracts at the Gulf settled $23 higher, matching a 4 year high.
- Urea – Up $4 at the Gulf. Knorr anticipates higher retail prices for October as wholesale prices move higher.
- UAN – Despite limited demand costs followed the rest of the nitrogen complex.
- Phosphates – Mixed last week but have bullish momentum.
- Potash – Trading at highest levels since 2015.
2019 Fertilizer Price Outlook
Gary Schnitkey of FarmDocDaily authored a post titled, “Fertilizer Prices Higher For 2019 Crop”. Schnitkey doesn’t sugar coat his analysis and jumps right into his key findings in his opening paragraph.
August and September fertilizer prices confirm expectations of rising fertilizer costs for 2019. So far, anhydrous ammonia prices are close to $80 per ton higher for 2019 production as compared to 2018 production. DAP prices are close to $70 per ton higher and potash prices are near $35 per ton higher. Higher fertilizer prices then lead to higher fertilizer costs. Current price increases suggest $15 per acre higher costs for corn and $5 per acre higher costs for soybeans. Cost increases will end a string of yearly declines in fertilizer costs that began in 2012.
Schnitkey then proceeds to share price charts for Illinois growers for these fertilizers:
- Anhydrous Ammonia
He concludes with his outlook and commentary statements. In the same vein as both Quinn and Knorr, Schnitkey anticipates that current fertilizer price increases signal higher 2019 fertilizer costs.
Schnitkey goes a step further and puts a per acre cost increase for corn and soybeans. This should be helpful as growers pencil out their 2019 financial scenarios. He believes it is prudent to assume cost increases of $15 per acre for corn and $5 per acre for soybeans.
Schnitkey does note that price declines could occur but that would run counter to historical price patterns. Furthermore, he notes:
“Fertilizer prices are highly correlated with energy costs. Brent crude oil prices recently reached $80 per barrel, the highest level since 2014.”
Schnitkey, G. “Fertilizer Prices Higher for 2019 Crop.” farmdoc daily (8):178, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, September 25, 2018.
Ag Nook did write that “Self Fertilizing Corn is Closer Than You Think“, but such hybrids for 2019 aren’t likely to be available.
Additionally, if you are planning a fall fertilizer application, “Avoid The Top 3 Fall Fertilizer Mistakes“.
Fertilizer prices have been moving higher in recent weeks. Furthermore, prices are likely to continue higher for the 2019 season. Assume cost increases of $15 per acre for corn and $5 per acre for soybeans as you pencil out crop plans for 2019.
Image Courtesy AgWeb
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