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Fertilizer costs decline, but the future is still unclear
 
By Tim Alexander
Illinois Correspondent

PEORIA, Ill. – Bulk tonnage fertilizer prices in the U.S. and Illinois receded in December, according to the latest Illinois Production Cost Report. Whether or not this signals a continued decline in tonnage price for popular crop fertilizers was a hot topic of discussion during the Illinois Fertilizer and Chemical Association’s (IFCA) 2023 convention in Peoria.
“I have to tell anyone who asks this question that if they can tell me what’s going to happen with Ukraine and Russia in the next six months, I can tell them how fertilizer prices are likely to trend,” said Kevin “KJ” Johnson, IFCA executive director.
According to the Illinois Production Cost Report, anhydrous ammonia sold for $1,308 per ton in Illinois on Dec. 29, a decline of $111 from just two weeks prior. Urea fell to $710 per ton, which represented a $109 decline. Potash, at $740 at the time of the report, fell in price by $126 per ton.
“High prices for nitrogen products are still driven by the price of natural gas in the European Union,” Johnson said. “While some prices have come down, the product that hasn’t come down in price as much is UAN (uranium ammonium nitrate, a liquid fertilizer product with a N content of 28 to 32 percent). The pressure could be brought down on UAN, which is a premium product, if certain factors continue to drive prices down. Urea, in particular, has really come back from where those prices were at nine months to a year ago.”
Though the tonnage price for most fertilizers is declining, the price reduction hasn’t quite yet become apparent at the retail level. “You’re starting to see it, but especially with UAN, farmers usually take a position and buy-in during August and September. We’ll see how it goes this year, but I think anhydrous, urea and the dry fertilizers will be in a decent spot,” Johnson said.
Producers should expect a topsy-turvy fertilizer market in terms of pricing and availability as long as the situation remains fluid in Ukraine, according to the IFCA leader, who added that developing or expanding North American fertilizer plants and gas terminals is a costly endeavor that won’t bear fruit for at least a few more years.
“To create a new fertilizer plant, I think you’re looking at about seven years. We will definitely see expansion of existing sites, but with permitting processes I won’t lie – it’s going to be tough to see any new facilities going up anytime soon,” Johnson said.
Fertilizer prices could face more upward pressure depending on developments in Ukraine and Russia, Johnson warned. “Could prices skyrocket back up? Absolutely. But prices for ammonia and drys are decent right now. Nobody loves paying $1,300 per ton, but I think there is more of a risk for prices going up than going down another $300 per ton,” he said.
The outlook for fertilizer prices at the Purdue Top Farmer Conference this month provided a mix of optimism and pessimism for farmers, according to the Illinois Farm Bureau news service. Mike Rahm, an independent consultant who spent more than three decades in the industry with Cargill and Mosaic, told IFB’s FarmWeek he looks for a more stable market compared to last year.
“I think prices have reset, likely bottomed, and are expected to move up a bit but not spike during 2023,” Rahm told attendees of the annual conference at Purdue.
Though the fertilizer market remains unstable largely due to the Russian aggression in Ukraine, farm chemical supplies in Illinois and the Midwest seem to be in a much better position, according to Johnson.
“As far as chemicals go, we’re in a much better position than we were one year ago at this convention. Last year at this time, we were hearing about Roundup shortages, Liberty shortages, insecticide shortages, but now we don’t hear this nearly as much. I think if there will be any shortages it could occur with your Group 15 pesticides, of which supplies are a little tighter. The industry has finally caught back up to where it needs to be,” he said.
1/24/2023