Fertilizer is a good value. It is a very good value--now.
You can check (and decide) that for yourself. Putting on the right amount, of the right product, at the right time, in the right place is the right investment to make this spring.
Fall application of dry fertilizers and of ammonia was "spectacularly average." Why spectacular? Because like this spring's outlook, a large segment of the industry predicted last summer there would be no fall application demand. That was not the case by a long shot.
But farmer buying activity since fall has been light--very light. By the way, that's been due to fed fears about spring demand.
At the same time fertilizer prices have been falling. The marketplace has seen a serious "reset" of prices for many/most fertilizer products.
Since last fall, anhydrous ammonia prices, for example, have declined some 20%. While some drop was expected on account of extra production-capacity globally, this is more than supply-and-demand analysts expected to see at this point. Prices for pretty much all fertilizers have been impacted by the sluggish, volatile world economy and by cheap energy. As a result, fertilizer price declines have been bigger than expected.
As reference, and measured relative to the current price of new-crop corn, we estimate it would take about 15 bushels of corn to buy 180 pounds of N in NH3 this spring—that's down nearly 25% from a year ago. And urea is a substantially bigger value yet. This is particularly good news for those looking to optimize their ROI in split applications made in your nitrogen management system.
The thing is that because of all the fear that spring nitrogen application won't happen, or will be very light, less supply may be "positioned" this spring. If farmers do decide that these good values warrant a good level of investment the market could come up short on supply.
While this is always a possibility in the commodity business, the potential seems especially significant this year—based on the amount of buying that appears to need to happen. I'd urge you to consider spring-contracting, at least for some of your needs. As history has shown, even if it seems improbable now, prices can spike in a very big hurry in this crazy business.
By: Joe Dillier, Director, Supply and Merchandising, Crop Nutrients for the FS Cooperative System