|By TIM ALEXANDER
BLOOMINGTON, Ill. — An economist with the Illinois Farm Bureau (ILFB) said that though natural gas prices are lower than last year, fertilizer prices will remain high throughout 2006 with the cost of anhydrous ammonia expected to rise by an estimated 30 percent.
“High natural gas prices, which ultimately account for 70-80 percent of nitrogen prices, are forcing U.S. nitrogen manufacturers to cut back on production, leading to more imports which is increasing global demand in a tight supply situation,” said Mike Doherty, senior economist and policy analyst for the ILFB.
“Natural gas prices, on the other hand, have declined from their $13 per million BTU average in 2005 $9 per million BTUs (futures were down to $7.74 MBTUs on Feb. 8). Despite the falling natural gas prices, fertilizer prices are expected to remain high throughout 2006.”
Doherty projected that anhydrous should cost $530-$700 per ton this year, an increase of at least 30 percent on 2005’s average price. Urea will cost between $400-$420 per ton, and potash prices will range from $300-$315.
Based on fertilizer costs for central Illinois corn averaging $55 per acre in 2002, Doherty projects a per-acre cost of $79 for 2006. He also said supply could be an issue for farmers this year.
“Doane Ag Services recently stated ‘a pretty tight situation for anhydrous ammonia’ … some areas may not get all the fertilizer they want,” Doherty said in an ILFB news release.
As for prices for diesel fuel, the forecasted average price is $2.55 per gallon, with the largest volatility factor being the current uncertainty regarding the situation in Iran.
“Current prices at around $2.50 per gallon are expected to remain in place throughout 2006,” Doherty said. “Stated differently, most of the industry’s economists believe current prices are the floor price for this year. Currently, retail diesel prices are 24 cents per gallon above regular unleaded gasoline while one year ago, retail prices were 17 cents per gallon above regular unleaded gasoline.”
A representative from Sun Ag, Inc., a dealership located on Route 251 south of El Paso, Ill. in Woodford County, said fertilizer prices have not yet reached a level 30 percent above last year’s costs.
“We’re not up 30 percent yet, but it could go that way depending on the natural gas situation,” said Sun Ag Sales Manager Eric Wahls. “The market is currently kind of volatile.”
Wahls said that one way area farmers could save money on fertilizer costs would be to adopt a no-till policy.
“I haven’t heard of anyone who has decided to go no-till, though some guys are thinking about it. I don’t know if any guys in this area are willing to go to no-till, though,” said Wahls.
Wahls said trucking expenses and higher diesel fuel prices could cause the dealership to raise its prices for fertilizer this year.