Fertilizer prices turn higher

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click image to zoom After months of steady decline, fertilizer prices have turned higher in the last few months. Retail prices for urea bottomed out at $439 per ton at the end of November, but the most recent data shows the price is up 25 percent from that low at $552 per ton. Prices for Anhydrous Ammonia are also up , but the increase is a less dramatic 10 percent. These higher prices coincide with the increase in demand as spring fieldwork and planting gets going.

One factor blamed for the rising fertilizer prices is the transportation problems that have reduced fertilizer deliveries to crop areas in the upper Midwest. The Surface Transportation Board has ordered the Burlington Northern Santa Fe Railroad (BNSF) and the Canadian Pacific Railroad to develop plans to ensure timely delivery of fertilizers. Both railroads blamed the extreme weather conditions this winter on the delivery problems. BNSF said it plans to add about 50 trains, mostly in the Dakotas, Minnesota and Montana solely for the purpose of transporting fertilizer.

click image to zoom DAP prices have also increased pretty dramatically since the beginning of the year. The price for DAP has increased by 18 percent so far this year, rising to $586 per ton. Prices for potash have not increased over the last few months, and at $475 per ton, are essentially the same as they were in December. While fertilizer prices have increased over the last few months, they are still below levels recorded at this time in 2013. Urea and DAP prices were down about 20 percent year-over-year at the end of 2013 and now they are down by 3 percent to 5 percent.

Fertilizer accounts for about 40 percent to 45 percent of the operating costs associated with planting an acre of corn. The recent changes in fertilizer prices have boosted operating costs by approximately $15 per acre using the budget for the total U.S. The impact on soybean production costs is much smaller so the recent changes in fertilizer prices favor the shift of some cropland from corn to soybeans for 2014.

A recent report from the University of Illinois puts the fertilizer costs for an acre of corn in that state at about $150 per acre, down $50 per acre from a year ago. Our current budget shows a year-to-year decline of $15 to $20 per acre. Combine the drop in fertilizer costs per acre with the 3.7 million acre drop in corn area and the result is a significant reduction in revenues for the fertilizer industry this year.

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