Time Input Buying to Capture Deals

In the past 18 years, corn expenses have increased by 131% and soybean expenses by 113%, according to economist David Widmar. ( Photos: Lindsey Benne; Chart Source: USDA )

Pinching pennies could be the difference between making or losing money next season. Some input prices are on the rise, and if you’re not careful you could miss out on a significant savings.

Fertilizer prices are rising for the first time in years. Gary Schnitkey, University of Illinois (U of I) economist, expects fertilizer costs for corn to increase $15 per acre in 2019 and for soybeans, $5 higher. The increase in fertilizer prices ends a run of decreases that began in 2012.

“Fertilizer prices have been in decline for a good six years now, which is significant, but our average fertilizer price climb is [now] above the three-year average,” says Davis Michaelsen, Pro Farmer Inputs Monitor editor. Because bad weather kept combines out of fields this fall there’s opportunity for fertilizer demand to erode, which could mean dealers will lower prices to move product.

“The other side of that coin is spring demand will be high,” Michaelsen says. “From current prices, I don’t see much more than a 5% decrease in the off-season, but it could be worth waiting [to book in] that January or February time frame.”

As of mid-October, anhydrous was above $500 per ton. Michaelsen anticipates that number could jump to $575 during spring—a 15% increase. Urea will likely follow that trend with about a 15% price increase to $450 per ton next spring.

“DAP prices are close to $70 per ton higher and potash prices are near $35 per ton higher,” Schnitkey says.

Michaelson says phosphorus (P) and potassium (K) are unlikely to see sharp spring price increases because they’re already high. He expects, at most, another 2% to 3% jump in P and K costs by spring, but notes fall is peak demand.
“We generally see as much as a 10% savings by waiting and booking [nutrients] in the off-season [January and February],” Michaelsen says.

Fuel prices are harder to predict in the current political environment. There will be opportunity to lock in low prices, but the fuel market could experience volatility depending on the outcome of discussions between the Trump administration and countries such as Saudi Arabia.

“If they [traders] feel good about the market there is nothing to worry about, but at the first hint of bad news or tension [with trade partners in the Middle East] buyers in the futures market drive prices higher, which trickles down to us,” Michaelsen says.
Farm diesel is also used for heating oil, and winter-time demand could also push prices higher.

“Diesel has been good about taking the crude oil market in stride,” Michaelsen says. “Now, peak season, I’m just a penny above the July price.”

However, volatility could come into play. Some experts are predicting $100 per barrel crude oil, which could make farm diesel prices jump to $3.25 per gallon, compared with the $2.58 per gallon cost at press time.

“Usually we find opportunity to book farm diesel for spring that week between Christmas and New Year’s, plus or minus a week,” he says. “Take advantage of that price dip.”

Propane prices are expected to move higher. “We’re looking at a propane price reset at about 20¢ higher than it has been the past two to three years,” Michaelsen predicts. “There’s a lot of drying this year, and if [there is] a cold winter, propane prices will reflect that added demand.”

He notes prices could climb as high as $1.60 per gallon. “Propane experts advise you keep your on-farm storage full,” Michaelsen says.

You might need to get creative to lower seed and chemical costs. Experts aren’t expecting major price shifts when it comes to seed and chemicals—but changing management practices could save money.

“When it comes to seed there are three levers that determine how much farmers spend,” explains David Widmar, co-founder of Agriculture Economic Insights. “Price per bag, trait technology and how much seed a farmer uses per acre.”

While exact prices for 2019 aren’t available, USDA found seed expenses for corn and soybeans to be down 1% from 2016 to 2017—averaging $99 per acre in corn and $58 in soybeans.

Pesticide costs, including herbicides, insecticides and fungicides are increasing, notes U of I. In 2000, pesticides were about $33 per acre but jumped to $73 per acre in 2017.

Herbicide resistance could be to blame for some of the increased cost, according to farmdoc. Be careful when cutting chemical costs because weeds and diseases can take a chunk out of yield. “You would hate to go for a low-cost application early in the season and then end up spending more money later with clean-up applications,” Widmar says.

His point: Be strategic with each input purchase when you consider taking advantage of potential discounts. You don’t want to sacrifice agronomics for savings—strike the balance to find success in 2019.

 

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