After increasing for six consecutive years, U.S. fertilizer prices are finally beginning to fall at the wholesale level, according to a recent report by the American Farm Bureau Federation (AFBF). “Up until very recently, fertilizer prices were astronomical at both the wholesale and retail levels,” says AFBF senior economist Terry Francl. “Fertilizer producers were clearly reacting to record commodity prices, and companies priced their products accordingly.”
Now that prices for corn, soybeans and other commodities have declined 50% or more from summer peaks, wholesale prices for fertilizer are dropping as well. But retail prices have yet to fall. Francl says the wholesale fertilizer price drop began about three months ago, generally after the time farmers applied fall fertilizer to their crops.
Wholesale prices for anhydrous ammonia in the Corn Belt have declined from the $1,000/ton-plus range to the $500 range. Urea has dropped from the mid-$800 range to the mid-$300 range. Diammonium phosphate has declined from $1,100 to $600/ton. The decline in potash prices has been less notable, dropping from a little over $900/ton to slightly over $800.
“The reasons for the decline involve much more than just crop prices. Natural gas prices have declined from more than $11 per million Btus (1,000 cu ft) to around $6 per million Btus. Natural gas is the primary input utilized to manufacture anhydrous ammonia,” according to Francl. “Anhydrous ammonia in turn is the basic feedstock for nearly all the other nitrogen fertilizers. So the cost of production of the entire nitrogen complex has waned considerably. There are similar declines in phosphate production and lower sulfur and phosphate rock prices.”
Potash prices appear to be retreating much slower, if at all, because more than 90 percent of the potash used in this country is imported, mostly from Canada but also from some European and former Soviet Union countries. Potash prices are therefore more affected by changes in the value of the dollar, which has declined recently, meaning that it makes imports more expensive.
Editor's Note: Are retail fertilizer price dropping in your area? Have you already locked in your supply needs for 2009, or are you holding off to see where prices are headed? To share your thoughts, comments or, experiences, please use the below comment form.