Corn acreage, fertilizer in pricey tango
With planting weather at its best, some Arkansas corn growers are getting frustrated knowing that a need-it-now fertilizer will still be in short supply for at least two to four weeks.
Urea is a key fertilizer for corn and rice. In the United States, corn is expected to have its largest acreage since 1937, according to the Prospective Plantings report issued March 30 by the U.S. Agriculture Department. In Arkansas, farmers intend to plant 660,000 acres of corn, up from last year’s 560,000. Most expected rice acres to decline significantly this year, but the report found the actual decline to be just 3 percent; dropping to 1.161 million acres from last year’s 1.19 million acres.
“There is a lot of frustration right now from corn producers who will be applying more than half of their nitrogen fertilizer in the next couple of weeks,” said Jason Kelley, extension wheat and feed grains agronomist for the University of Arkansas System Division of Agriculture. “The price spike and limited availability is coming at a bad time for corn producers.”
Some of that frustration can be measured in dollars.
“For those who have not prepaid or hedged with local fertilizer suppliers, the higher prices are adding extra $50 an acre on average for rice and corn production,” said Prairie County Extension Staff Chair Brent Griffin. “Couple that with higher phosphorous and potash prices, production cost for the average farm is up $100 acre. Total fertility program will run in excess of $250 acre.”
“Last week, urea coming through the Gulf of Mexico averaged $675 a ton, with some barges trading at $730 per ton, which equates to our local retail prices being just over $800 a ton,” said Scott Stiles, extension economist with the University of Arkansas System Division of Agriculture. “At the gulf, prices shot up $75 a ton as soon as the news broke on March 30 about the corn acreage.”
While there is a relationship between corn and urea prices, it’s complex.
“Everyone is asking ‘what is driving the price of urea in the gulf?’” Stiles said. Among the factors that may come into play:
- The 4 million acre increase in corn nationwide
- Early planting and early maturing winter wheat
- A bearish outlook for grain prices through the winter. “All grain prices peaked on Sept. 1, and declined through December,” Stiles said. “Nitrogen prices followed right along with grain prices.”
“With that type of market outlook for grains, many farmers didn’t pre-order or book urea in advance,” Stiles said. “So the fertilizer retail community didn't purchase excess amounts of urea.”
Gulf urea prices hit bottom Jan. 24 “and now it’s increased nine of the last 10 weeks,” Stiles said.
There is some light at the end of the tunnel.
“In economics we say ‘nothing cures high prices like high prices’," he said. “ I can assure you today's prices are calling in product from all corners of the globe.
“Industry sources confirm there is a lot of urea on the way to New Orleans, some arriving this month,” he said. “It's going to be a painful wait, but this hysteria should be nearing an end by late May, but that's no consolation to the growers that will need urea between now and then.”
Griffin also said he hadn’t heard of any urea shortages in his county.