Higher Corn Prices Lead To Fertilizer Price Spike

U. S. fertilizer prices have doubled over the past year, with a quarter of the gains coming in the last three months, signalling that farmers will expand corn planting next spring to capitalize on high prices.

Trade sources said increased fertilizer orders by farmers, coupled with corn prices hovering around two-year highs near $6 per bushel, could mean the area planted with corn rises past 90 million acres from 88.2 million this year.

“We’re in an unusual situation. We’re about 60 days short of supply and 30 days ahead on fertilizer demand,” said Jean Payne, president of the Illinois Fertilizer and Chemical Association, Bloomington, Illinois.

“We won’t have tonnage figures until January but I can tell you that the demand is up because of the early harvest and the higher corn prices,” she added, basing her assessment of demand on anecdotal accounts from farmers in Illinois.

Corn futures at the Chicago Board of Trade have surged more than 40 per cent from a year ago and about 80 per cent

above the summer low. This has fuelled expectations for increased corn seedings next year, and the rise in fertilizer demand provides evidence that will happen.

In a sign of rising demand from farmers, the cost of anhydrous ammonia (NH3), the main source of nitrogen for corn growers, has doubled in some parts of the U. S. Midwest from around $400 per ton a year ago to $800.

Payne said the price of anhydrous ammonia probably will rise further because the big surge in demand will come once soil temperatures drop to 10 C, when anhydrous ammonia converts to nitrate.

Maximum corn production requires vast amounts of nitrogen fertilizer and most of the nitrogen stems from the application of anhydrous ammonia in the fall and early winter and also as a side dressing to the crop in early spring.

“There is no doubt the price of anhydrous is going up. I booked some for $545, up from last year’s $415 and now the price in central Illinois is from $610 to $675,” said Dan Cekander, Newedge USA analyst and operator of a family farm.

“I can’t rule out that it could be priced at $800 in some areas, it is going up,” he said. “For comparison I booked at $990 in the fall of 2008 for the 2009 crop and it eventually went up to $1,200 and $1,300,” Cekander said.

Harry Vroomen, vice-president of economic services with The Fertilizer Institute in Washington, said higher corn prices were leading to increased application of fertilizers.

“The higher crop prices should lead to a six-million to eight-million acre increase in the number of planted acres of corn, soybeans, wheat and cotton in 2011. These crops typically account for 70 per cent of total U. S. nutrient use,” he said.

The projected increase in planted area would equate to about a rise of 2.5 per cent to 3.5 per cent over the combined 230.5 million acres planted in 2010, according to U. S. Department of Agriculture data.

He said about 45 per cent of all fertilizer is applied in the fall and 55 per cent in the spring.

Paul Fixen, director of research for the International Plant Nutrition Institute, Brookings, South Dakota, said fertilizer consumption tracks grain prices.

In the United States, in 2009, a year of lower prices, phosphorus consumption was down to around 3.5 million tons from the usual 4.5 million, potash use dropped to three million tons from about five million and nitrogen was around 12 million tons down from the usual 12.5 million to 13 million, he said.

The U. S. Gulf spot price for diammonium phosphate (DAP), the most widely used fertilizer nutrient, had surged to $575 per tonne by mid-October. That’s up sharply from $460 per tonne three months ago as corn gained over 40 per cent, and up from roughly $300 a year ago.

But it remains far short of more than $1,000 for DAP in 2008, when CBOT wheat, corn and soybean prices soared to record highs.

———

We’reinanunusual situation.We’reabout 60daysshortofsupply and30daysaheadon fertilizerdemand.”

About the author

Comments

explore

Stories from our other publications