Cheaper Fertilizer Spells Relief For U. S. Farmers

U. S. farmers who have faced lower selling prices for corn and soybeans this year should see some relief when they plant crops this spring as fertilizer prices have fallen as much as 60 per cent from the record highs of October 2008.

Nitrogen, phosphate and potash – the three essential crop nutrients – have dropped sharply since hitting record levels, due to decreased demand and fallout from the recession.

Farmers will likely increase fertilizer applications this year as they replenish soil nutrients and boost corn and soybean acreage, analysts and crop specialists said.

Allendale Inc. and Informa Economics, two closely watched analytical firms, have forecast both crops to grow beyond the already record-large size of the 2009-10 crops. The U. S. Agriculture Department will release its first acreage projection on March 31.

“Farmers last year put less phosphate and potassium on because of the high prices, and they’re going to need to make up this year to replenish the soil,” said Gary Schnitkey, professor of farm management at the University of Illinois.

Diammonium phosphate fertilizer (DAP) prices in Illinois have fallen about 60 per cent from its top of more than $1,100 per ton in October 2008, while potash and anhydrous ammonia have fallen 50 and 52 per cent, respectively, according to USDA data.

Falling prices and lacklustre demand have pressured earnings at the world’s largest fertilizer maker Potash Corp. of Saskatchewan and at Agrium Inc. Both companies reported drops in fourth-quarter profits but lifted expectations for fertilizer sales this year.

Lower fertilizer costs and a huge South American soybean crop may also lead to an increase in U. S. corn acres this year at the expense of soybeans, said Chad Hart, agriculture economist at the University of Iowa.

Corn demands roughly twice the amount of fertilizer as soybeans and also yields more bushels per acre.

“In 2009, producers saw high fertilizer prices and they made a conscious choice because (soybeans need) less fertilizer,” Hart said. “We probably won’t set another record this year in soybeans.”

Benchmark prices for both crops have fallen sharply this year ahead of harvest in Brazil and Argentina. Chicago Board of Trade corn futures have fallen more than 11 per cent this year, and soybean futures by 2.8 per cent.

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