Fertilizer prices have been on a declining trend in recent months, yet farm costs likely will remain high this year, said University of Illinois Agricultural Economist Carl Zulauf, in a report published by the Illinois farmdoc daily.
Declines in natural gas and corn prices likely led to nitrogen fertilizer price decay, Zulauf said. However, any further market disruptions, from escalating global tensions to supply chain disturbances, could lead to fertilizer price increases, Zulauf’s report said.
RECENT FERTILIZER GYRATIONS
While fertilizer prices have declined in recent weeks, current prices remain high by historical standards, he said. From 2016 to 2020, anhydrous ammonia averaged $518 a short ton, $719 less than the $1,237 price on Feb. 23.
Similarly, Diammonium Phosphate prices averaged $454 a ton from 2016 to 2020, $376 less than the $830 current price, Zulauf said.
Potash prices average $350 a ton from 2016 to 2020, $295 less than the $645 current potash price, he said.
For corn, these prices are consistent with a doubling of fertilizer costs in 2023 as compared with 2016-2020 averages, Zulauf said. Soybean fertilizer costs will nearly double.
Moreover, much of phosphate and potash applications occur in the fall, he said. Those applications, along with fall-applied nitrogen, were made before price declines. In these cases, fertilizer price declines may provide reduced costs for 2024, but will not affect 2023 fertilizer costs.
REASONS FOR FALLING PRICES
Anhydrous ammonia prices are related to corn and natural gas prices, Zulauf said. For example, from 2008 to 2023, monthly anhydrous ammonia and corn prices have a .74 correlation coefficient, and anhydrous ammonia and natural gas prices have a .64 correlation coefficient.
In recent weeks, natural gas and corn prices have fallen, he said. Natural gas prices at one Illinois location were $8.81 per million BTUs in August 2022, the highest since July 2008. From there, natural gas prices fell to $3.20 per million BTUs in January 2023.
Chicago Mercantile Exchange natural gas futures point to natural gas prices in the mid-$2.00 range to the high-$3.00s for the rest of the year, Zulauf said. A very mild heating season led to reduced natural gas consumption for heating, placing pressures on natural gas prices.
Moreover, US production of natural gas increased to record levels, he said.
National monthly corn prices also decreased in recent months, Zulauf said. The monthly average corn price reported by the USDA’s National Agricultural Statistical Service averaged more than $7.09 a bushel in September 2022, falling to the mid-$6.00 range. While still high, reductions in corn prices likely have had a negative effect on nitrogen prices by reducing application incentive.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers last week ranged from $159.00 to $165.08 per cwt, compared with the previous week’s range of $160.59 to $162.08. FOB dressed steers, and heifers went for $254.08 to $261.56 per cwt, versus $251.10 to $258.71.
The USDA choice cutout Friday was up $0.82 per cwt at $289.32 while select was down $0.72 at $276.86. The choice/select spread widened to $12.46 from $10.92 with 65 loads of fabricated product and 12 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.50 to $1.60 a bushel over the Mar corn contract, which settled at $6.45 1/4, up $0.07 1/2. Bids in Kansas were steady at $0.75 over May, which settled at $6.39 3/4 a bushel, up $0.06.
The CME Feeder Cattle Index for the seven days ended Thursday was $185.43 per cwt, up $1.41. This compares with Friday’s Mar contract settlement of $190.00 per cwt, up $1.42.