- Fertilizer price is volatile
- Foreign sourcing an issue
- Management strategies
Crop price effect
U.S. crop prices and fertilizer prices may not be correlated, however. “We can have low commodity prices and high fertilizer prices.”
“Fertilizer prices used to be boring. But since 2008 it’s been a roller coaster ride. The shift to bioenergy crops helped fuel the volatility.”
Kenkel said the food versus fuel issue, as well as increased transportation costs, pushed prices to record highs. “A credit crisis and the economic downturn also encouraged users to delay buying. And China began to hold fertilizer in country instead of exporting.”
Kenkel said fertilizer price accounts for about one-third of total crop production costs.
He also mentioned possible strategies to reduce fertilizer price risk. Forward pricing may not always be practical because of purchase minimums and other limitations.
He said records indicate that the best time to buy urea is the first week in July. “Early April is the worst time to buy. That’s out of sync with the Corn Belt.” Even that strategy doesn’t always work. “In 2008, the first week in July was the worst week to buy.”
Systematically buying fertilizer does reduce price by 5 percent. Buying at the worst time increases price by 15 percent and risk by 55 percent.
Growers may reduce price risk by switching nitrogen forms, application timing “within or between years, from fall to spring, for example,” Kenkel said.