Harvest season is winding up or over in many areas, and farmers already are thinking about their equipment, fuel, seed and fertilizer needs for the spring. The anticipated cost of fertilizer, in particular, is weighing heavily on the minds of many farmers crunching farm budgets this winter.

If tractor-seat common sense is a guide, fertilizer-related expenses will continue increasing for the foreseeable future, and a few points made at a recent Fertilizer Institute conference support that belief.

One thing made clear at the conference is that supplies of nitrogen, phosphates and potash-the classic combination of N, P and K-will remain tight as world-wide demand for these fertilizers remains strong.

"There have been some major shifts in fertilizer supplies here in the United States over the last few years," Bob Young, AFBF chief economist, said.



A closer look shows why this situation is unfolding. The analysts at the fertilizer conference based their presentations on the belief that about 88 million acres of corn would be planted in 2008, a small decline from this year's record-setting planting of 93 million acres. That slight shift away from corn means not as much nitrogen in the form of anhydrous ammonia, a common type of fertilizer applied to corn acreage, may be used in the year ahead.

The lessening in demand for nitrogen is unlikely to translate into lower prices for farmers in the market for this product, however. The U.S. imported about 57 percent of its nitrogen last year, compared to 31 percent in the 1999/2000 growing season. One reason for the import increase is rooted in the price of natural gas, nitrogen fertilizer's key ingredient. Trinidad, a tiny island in the Caribbean, has an abundant supply of natural gas, and it manufactures anhydrous ammonia more cheaply than the U.S. Trinidad is expected to be this country's largest supplier of anhydrous for some time to come, while other popular nitrogen fertilizers such as urea are imported from Russia and Eastern Europe.

"There are only limited expectations of additional global nitrogen supplies in the next few years, but demand is growing quickly, particularly in the developing world," Young said.

Other fertilizers U.S. grain growers count on, such as phosphates and potash, are increasingly used by their foreign competitors. Increasing reliance on phosphates and potash in Brazil, India and China and continued strong demand in the U.S. mean prices are likely to stay at or above current levels.

While the U.S. is a major manufacturer and exporter of phosphates, stocks are relatively low at this time. If disruptions in the manufacture or distribution of these fertilizers materialize, then the probability of spot market price spikes increases. More than 90 percent of the potash fertilizer used in the U.S. is imported, the bulk of it from Canada but also some from Russia and the Congo. Given recent flooding that affected the production of potash, this also suggests supplies may be tight in 2008.



"We are looking at a tight fertilizer picture overall for the next two or three years at least," Young added, "with few breaks expected before 2009 or even the 2010 growing season."



While some farmers enjoy the fruits of a successful harvest this winter and others hope for better conditions in 2008, there is no doubt that planning for spring is under way. Farmers are taking close looks at their balance sheets, as they determine how much fertilizer to purchase ahead of planting time. And figuring out how to reduce fertilizer use to the bare minimum needed to grow healthy crops will be a valuable skill many farmers try to hone this winter.



Anne Keller is a director of news services for the American Farm Bureau Federation.