“As every farmer knows, fertilizer prices are high, often at all-time record levels.”
Bad as it is, the outlook for fertilizer price reduction is low, most likely the opposite.
That’s the analysis last week from Nick Paulson, University of Illinois agriculture economist.
“While fertilizer prices have declined since spring, they remain high, significantly above a year ago,” Paulson said.
“Therefore, reducing rates where practicable seems prudent,” Paulson admitted.
Some fields will have soil test levels above those that will cause a yield response from phosphorus and potassium applications. “Significantly reducing or eliminating applications in these fields makes economic sense,” he said.
“Likewise, nitrogen applications above recommendations can substantially reduce returns,” Paulson pointed out.
“Changes in nitrogen prices until spring will be influenced by variations in corn and natural gas prices,” he evaluated.
Fertilizer prices remain at high levels going into the fall of 2022. “Anhydrous ammonia prices continue to surpass all-time highs reached during the 2008 financial crisis,” Paulson noted.
In the fall of 2008, anhydrous ammonia reached a high of $1,161 per ton Anhydrous ammonia prices have exceeded the 2008 previous record since October 2021.
Anhydrous ammonia prices were over $1,600 per ton through April 2022, falling to $1,153 per ton on August 25, 2022. “Then, anhydrous ammonia again increased, reaching $1,318 per ton on September 22,” Paulson tallied.
Phosphorus and potash fertilizers also remain at high levels. Phosphorous was over $1,000 per ton in June 2022, but last month prices had dropped to $947 per ton.
Potash prices have remained relatively stable at high levels, with a price of $857 per ton reported on September 22, 2022.
“While ammonia and phosphorous prices have declined since spring, current fertilizer prices are higher than last year,” Paulson reiterated.
Last year, fertilizer prices increased from fall 2021 to spring. Farmers who purchased fertilizer later generally had higher costs. “I do not forecast a similar trend in 2023,” Paulson said optimistically.
Anhydrous ammonia generally has lower costs per pound of actual nitrogen when compared to either nitrogen solutions or urea.
“The use of different nitrogen sources or eliminating nitrogen stabilizers because of post-plant applications will alter costs,” Paulson noted.
Corn and soybean yields are not dependent on phosphorus applications if levels exceed somewhere between 60 and 70 pounds per acre. If soil tests are above that level, phosphorus applications are not needed to maintain yields.
Similarly, corn and soybean yields are not dependent on potash applications when potassium levels exceed between 360 and 400 pounds per acre.
“Many fields have soil test levels above those where yields will respond to fertilizer applications,” Paulson emphasized. “In these situations, cutting or eliminating applications is warranted in any year, particularly in high-price years like now.”
Farmers may be reluctant to forgo fertilizer applications on rented farmland, as agreements may specify nutrient test levels be maintained.
“Revisiting those agreements seems warranted if soil test levels are above levels where yield response exists,” Paulson said. “Neither the farmer nor the landowner receives any gains from this application.”
Moreover, a reduction in fertilizer applications would be preferred from an environmental standpoint. “Higher soil test levels potentially increase phosphorus and potassium runoff if soil erosion occurs,” Paulson said.
Even if soil test levels are below response levels, reducing phosphorus and potassium applications may still be warranted.
Many farmers apply nitrogen at rates above potential profitability. Data from Precision Conservation Management confirms that profits can also sometimes be increased by reducing nitrogen applications.
Some farmers are considering waiting until later in the spring, with hopes that nitrogen prices will decline.
“Anhydrous ammonia prices are highly related to corn and natural gas prices,” Paulson repeated. “Currently, corn and natural gas prices are at high levels.”
September 2022 corn prices were only slightly higher in 2012 and 2013. Current natural gas prices have been at levels not exceeded since 2009.
“As a result, one should expect to see high anhydrous ammonia prices,” Paulson said. “If anything, anhydrous ammonia prices are low relative to current corn and natural gas prices.
“Historical relationships suggest anhydrous ammonia prices near $1,400 while current anhydrous ammonia prices are near $1,300 per ton,” Paulson related.
Both corn and natural gas prices could decline into spring. “Of course, much can change between now and spring,” Paulson said.
A cold winter likely would lead to higher natural gas prices. Events in the Ukraine-Russia war also will have a bearing on prices.
“Splitting nitrogen purchases is a sound risk management strategy in this situation,” Paulson advised.
However, for farmers concerned about applying nitrogen post planting, a new crop insurance, Post Application Coverage Endorsement (PACE), is available.
“Fertilizer prices remain high and will result in high fertilizer costs for 2023,” Paulson repeated. “So, reducing rates seems prudent in several situations.”
Phosphorus and potassium applications can be reduced or eliminated if soil test levels are sufficiently high. “Nitrogen rates should be applied at maximum return to nitrogen levels,” he stated emphatically.
“Significant uncertainty exists concerning fertilizer prices moving into spring,” Paulson clarified.