Input prices expected to be steady to strong this fall
Friday, July 30, 2010
Fertilizer terminals currently are rebuilding inventory after strong demand last spring drained supplies.
But, if farmers have a good window to apply anhydrous ammonia this fall and/or boost corn acres for next year, some locations in Illinois could experience spot shortages of fertilizer, according to Joe Kilgus, area sales manager in Southern Illinois for GROWMARK.
“There are a lot of predictions we’ll plant the largest corn crop ever (next year),” said Kilgus, who provided an input price outlook this week at the Illinois Farm Bureau Commodities Conference in Normal. “If we have a good fall it will pressure the ammonia supply and prices could go back up.”
USDA in June projected Illinois farmers planted 12.6 million acres of corn this year compared to 12 million acres in 2009.
The average price per ton for urea ($426), liquid nitrogen ($262), diammonium phosphate ($505), and potash ($489) increased last month by a range of 29 cents to nearly $7 per ton, according to the Illinois Production Cost Report. Anhydrous ammonia prices late last month averaged $546 per ton in the state, which was a slight decrease from the previous two weeks.
In the near future Kilgus believes there is little chance of another fertilizer price spike (ammonia prices surpassed $1,000 in 2008) but he also believes farmers are unlikely to see much of a drop in prices.
“This fall (fertilizer) prices likely will be more than last fall and comparable to last spring,” he said.
The fertilizer market is expected to remain strong due to increased competition around the world. Kilgus also noted phosphate stocks are at a five-year low.
“The U.S. has become a small player (in the fertilizer market),” Kilgus said. To acquire or keep fertilizer “the U.S. has got to outbid the competition.”
China and India consume 44 percent of all nitrogen fertilizer in the world compared to just 11 percent in the U.S. Meanwhile, the U.S. produces just 9 percent of all nitrogen fertilizer in the world, which makes it a net importer.
The world market and changes in production costs/fuel prices have added volatility to the fertilizer market. Kilgus recommended farmers use risk management strategies similar to selling grain and lock in a portion of their input prices when they are at manageable levels.
Diesel fuel prices also appear to be strong as the fall harvest season approaches. The Energy Information Administration (EIA) last week reported an average diesel price in the U.S. of $2.92 per gallon, up 2 cents from the previous week and 39 cents higher than the same time last year.
The EIA short-term energy outlook projected oil prices would average $79 per barrel the second half of 2010, up from $76 at the end of June, and $83 in 2011.
For More Info Contact:
John Hawkins, News Service Director
Phone 309 557-2237 Fax (800) 640-1995 E-mail jhawkins@ilfb.org
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