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Fertilizer Expenses Keep
Inching Up

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, American Farm Bureau chief economist, says.

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 2007’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.

Potential Impact On Prices?

The lessening in demand for nitrogen is unlikely to translate into lower prices for farmers in the market for this product, however. The United States imported about 57 percent of its nitrogen in 2007, 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 United States. 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.

Countries Compete For Fertilizer

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 United States mean prices are likely to stay at or above current levels.

While the United States 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 United States is imported, the bulk of it from Canada but also some from Russia and the Congo. Recent flooding that affected the production of potash also suggests supplies may be tight in 2008.

Search For Savings

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.

The American Farm Bureau Federation contributed information for this article.


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