By LINDA McGURK
Indiana Correspondent

URBANA, Ill. — The global financial meltdown, in combination with a late harvest in the United States, have led to excessive fertilizer inventories and plunging wholesale prices. But significantly lower prices on the retail level have yet to materialize, and for many farmers across the Midwest, trying to get a better deal from suppliers is a waiting game.

“Just like everybody else, I’ll probably wait to buy until the very last day,” said Lyle McKanna, who raises corn, wheat and soybeans in Putnam County, Ohio.

McKenna plans to cut down on his corn acres because of the high cost of fertilizer, and rent more ground out for tomatoes. “I think quite a few farmers around here have cut back on corn acres. Some guys are not doing any corn,” he said.

McKenna used fertilizers conservatively last fall because of the high cost but is hoping the price of nitrogen will fall before he makes his final spring purchases. “I’m already down to the least amount of fertilizer I can use,” he said.

Gary Schnitkey, a farm financial management specialist with the University of Illinois extension, expects retail fertilizer prices to decline this spring and said there are some incentives for farmers to hold off on their purchases. But there are also some risks, including the possibility of tight supplies if fertilizer companies curtail production.

“There also are geopolitical events that may impact fertilizer prices. For example, Russia and the Ukraine recently have had a dispute over natural gas pricing, potentially leading to a cutoff of natural gas supplies to Europe. If this unlikely event occurred, natural gas prices in the United States could escalate, leading to higher nitrogen fertilizer prices,” he stated in a report released by the UoI. “The point is not that this or other events will occur; rather, the point is that there remains risks for higher fertilizer prices.”

Assuming fertilizer prices will follow wholesale prices down, Schnitkey said corn profitability will increase relative to soybean profitability, which could influence farmers’ planting decisions.
Using a model comparing fall prices for anhydrous ammonia, diammonium phosphate and potash with projected spring prices, Schnitkey found the cost of fertilizing a field in northern and central Illinois will be $143 per acre for corn and $64 per acre for soybeans. In the fall, the price was $210 per acre for corn and $92 for soybeans.

“The $67 reduction in corn fertilizer costs is $39 larger than the $28 reduction in soybean costs. These fertilizer cost reductions increase the profitability of corn relative to soybeans by $39 per acre, a sizable increase that may cause corn to be more profitable than soybeans,” Schnitkey stated.

“As farmers make planting decisions, up-to-date fertilizer prices should be used in calculating relative profitability.”

But Bruce Rowher, a corn and soybean grower in Iowa’s O’Brien County, said farmers in his area will probably stick to their regular rotations, regardless of the fertilizer price.

“Farmers who keep track of the nutrient level in their soil and are in the upper level will probably back off (from fertilizers). Those who don’t have as high fertility will have to think long and hard about the yield loss they can take relative to the fertilizer cost. It’s a balancing act we’ll have to face as individuals, and it may vary from field to field,” Rowher said.

His local fertilizer supplier charges $610 per ton for urea, $1,030 per ton for phosphate and $845 per ton for potash, which is about the same price Rowher paid when he purchased the bulk of his fertilizer around the beginning of the year. With the decline in grain prices, farmers are putting pressure on suppliers to bring the price down, but because many elevators bought their inventories when wholesale prices were high, they can’t lower their prices without losing money.