Corn values ​​are key to steering fertilizer prices

KANSAS CITY — Fertilizer prices stabilized or fell slightly in the five months following Russia’s invasion of Ukraine, but remain at significantly higher levels than in 2021, so growers buying early to start planning for 2023 crops won’t see the same savings they did last year.

These findings and other expectations for the fertilizer market in 2023 stem from research undertaken by the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign and published on Farmdoc Daily on July 19.

In 2021, farmers who bought nitrogen-based fertilizers early paid significantly less than those who waited, the economics researchers said. From July 2021 to July 2022, anhydrous ammonia prices fell from $726 per ton to $1,469 per ton; diammonium phosphate (DAP) rose from $688 to $983 per ton, and potash rose from $481 to $862 per ton.

These price increases began to mount before the Eastern European War broke out. Immediately after the Russian invasion, prices for fertilizers, grains and oilseeds soared. In July, prices for these three commodity categories retreated close to pre-war levels of January 2022, indicating an apparent absorption by markets of the impacts of the conflict.

The good news for farmers planning for the 2022-23 crop year is that the supply of fertilizer for the Western Hemisphere appears to be adequate, the UI economics team said. But the outlook for fertilizer costs in the case of anhydrous ammonia is closely tied to the direction of natural gas and corn prices. For the former, prices reached a monthly average of $8.14 per million BTU in May and $7.70 in June, well above recent averages and the highest levels since 2008.

The main driver is the price of maize, according to the article, which has fallen to pre-war levels in Ukraine but remains at relatively high levels.

“Current maize prices indicate relatively high nitrogen fertilizer prices, but a continued decline in maize prices could indicate the potential for further declines in nitrogen fertilizer prices,” according to the IU study.

However, the report noted geopolitical possibilities that could push prices up once again. Russia has slowed natural gas supplies to Western Europe citing pipeline maintenance. A further reduction or total closure of this pipeline would increase the price of nitrogen fertilizer production in Europe and could trigger a recession affecting all grain and fertilizer markets. Second, there are fears that the main fertilizer exporter, China, will limit supply outflows. The severe COVID-related restrictions there have heightened fears of a Chinese recession that could depress grain sales to China and, therefore, grain prices in the United States.

Ultimately, U.S. farmers face much higher year-over-year fertilizer prices and perhaps more market uncertainty than usual, the report concludes.

“Given this uncertainty, farmers buying nitrogen in late summer/early fall may wish to price 2023 corn production,” the team said. ‘user interface. “High maize prices are needed to cover high nitrogen prices. If the sales are not made at the same time, corn prices could fall between the time the nitrogen is purchased and the time the corn is sold.

Farmers considering their options could delay nitrogen purchases or spread applications between fall and spring to spread price risk, the report concludes.

“If considering post-plant application, farmers may consider PACE, a crop insurance product that is an add-on to the COMBO product,” the UI team said. “This endorsement will cover financial losses if nitrogen cannot be applied after application due to causes covered by the policy.”