Input costs (fertilizers, specifically) for production agriculture have been skyrocketing over the last couple of years and many producers were not really excited about paying the fertilizer bill this fall/winter, but in the past few months things have changed a little. Instead of looking into the crystal ball and trying to forecast what will happen, Robert Mullen and Keith Kiedrick, Ohio State University, suggest first understanding what has happened in the last two years.



What is responsible for the current price situation? There were several factors at play that affected fertilizer prices over the last couple of years; it cannot be attributed to a single issue alone. For phosphorus and potassium fertilizers, one factor was increased commodity price. After commodity prices increased in the fall/winter of 2006 demand for fertilizer products increased the following year. Additionally, South America and eastern Asia increased their imports of both phosphorus and potassium. These events put severe pressure on fertilizer supplies.



For nitrogen products, natural gas, which makes up 80 percent of the cost of anhydrous ammonia, was increasing in price. Biofuel demand also had an impact on fertilizer nitrogen prices as more acreage was planted to corn. In the fall of 2007, the dollar was weakening substantially in the world financial market, making other countries more attractive for global phosphorus and potassium producers. Fuel price for material transport also increased rapidly. The convergence of these factors caused fertilizer prices to increase rapidly to the levels we have seen this past summer.



Fast-forward to October 2008, and what is going on now? First, commodity prices have fallen considerably from where they were at this time last year. Thus, many growers are far less interested in buying fertilizer (and for some you this is definitely the right decision), and demand is slightly lower. The dollar has also strengthened. So, in the last few months, nitrogen and phosphorus prices have dropped (not a tremendous amount, but any amount helps). This is especially true for urea. Potassium prices have and are predicted to remain steady due to tight supplies. Will prices fall more dramatically this fall? Good question, and unfortunately, we do not have a solid answer.



So, what are the long-term forecasts? It appears as if nitrogen and phosphorus prices will ease a little, but expect potassium prices to remain up until additional capacity becomes available in the next few years.



The real question is: what does this mean for you as a producer? For phosphorus and potassium management-soil test, soil test, soil test. This can save you a tremendous amount of money in fertilizer this year if your soil test levels allow. Ohio State University provides recommendations for both phosphorus and potassium in our Tri-State Fertilizer Recommendations (http://agcrops.osu.edu/fertility/). If you are above the maintenance range with regard to soil test levels, you do not have to supply phosphorus or potassium this year. Rely on what you have supplied historically to get you through the next crop rotation.



Purdue University has recently published an article that discusses drawdown levels for soils, and it is a good educational tool for those who do not understand soil phosphorus and potassium buffering. Utilize Ohio State University's Nitrogen Rate Calculator for making nitrogen decisions for corn production. Remember, even though the economic climate has changed dramatically, sound agronomics have not.



Source: C.O.R.N. Newsletter, Ohio State University