Fall 2009 Fertilizer Prices - Act now!

Fertilizer prices have dropped significantly from a year ago and are below the five-year averages.

They hit new highs in 2008 as a number of market forces aligned and caused an artificial spike. Demand destruction caused by last year’s high prices and a global recession coupled with an oversupply has driven the collapse of the fertilizer market.

Experts predict that regardless of what happens to grain prices, fertilizer demand will rebound for next year’s crop. While some farmers reduced or eliminated fertilizer applications this year due to excessively high prices, few will scale back two years in a row.

Commodity prices are also back to “normal” levels as compared to the very high levels seen in early 2008. The livestock industry down cycle is creating less demand for feed, which in turn creates less demand for production of feed grains and pastures, thus requiring less fertilizer input needs.

“The reasons for the decline involve much more than just crop prices. Natural gas prices have declined from more than $11 per million BTUs to around $6 per million BTUs. Natural gas is the primary input used to manufacture anhydrous ammonia and typically accounts for 80 percent to 90 percent of all input costs,” American Farm Bureau Federation senior economist explained. Once natural gas prices begin to rebound, look for a similar shift in fertilizer prices.

The impact of the global recession includes the decreased use of nitrogen by the industrial sector, making more supply available for the agriculture industry. Phosphate manufacturing input costs (nitrogen and sulfur) are lower due to less demand overseas.

Producer inventory levels of potash are higher than normal. Very high potash inventory levels were in the supply channels going into spring 2009 making the need for additional spring shipments unnecessary. Currently the supply pipeline has been destocked and has the need to resupply.
Although potash prices have dropped from season high levels over the past few months, it has not been as significant as the decrease seen in nitrogen and phosphorus.

Global potash producers are managing inventory levels to balance the supply versus demand equation.
Growers should focus on nutrient management decisions that will economically produce crops. Fall fertilizer applications have both economic and logistic advantages. Soil conditions are typically more conducive for application, there is more time available than during the busy planting season and equipment and labor are better distributed.

Virginia Tech research reveals that small grain yields are determined by the growth of fall tillers. Adequate fall development is essential for developing a small grains crop that has increased profit potential.

There is no substitute for adequate crop nutrition. Farmers who carefully monitor their soil nutrient status and apply fertilizer in the fall will benefit through increased yields and improve overall farm profitability.
Now is the time to take action and book and apply your fertilizer needs. See your local Southern States dealer today!