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Big fertilizer price drops boost corn profit potential

Agriculture.com Staff 04/30/2010 @ 3:07pm

Fertilizer prices dropped dramatically in the last year, bottoming out last fall before rebounding slightly earlier this spring. Still, it's a farmer-friendly market after the last few years of high prices pinching corn profit margins.

Between April of last year and this month, USDA-NASS numbers for the Corn Belt indicate a $250-per-ton price drop for anhydrous ammonia, while both potassium and potash are sharply lower as well, $350 and $50 per ton respectively.

Higher prices caused some farmers to trim back nitrogen applications in the last 2 years. The recent fertilizer price shift should allow those applications to return to normal levels without disrupting the supply chain, says Purdue University cropping systems management director Bruce Erickson.

"Farmers that may have cut back on fertilizer rates in recent years due to previously higher prices may be feeling a bit more comfortable with their normal program," he says. "The overall supply of anhydrous ammonia available in the United States is expected to be large enough to keep prices in check, but the capacity of the delivery infrastructure has been stretched in some places this spring."

Low natural gas prices are making domestic nitrogen sources more cost-competitive. That, in turn, is passing more savings along to farmers.

"Natural gas prices are low enough currently to give U.S. fertilizer producers a cost advantage for converting natural gas to anhydrous ammonia relative to some of the countries from which we had previously been importing nitrogen," Miller says. "It is very possible we will see a decline in nitrogen imports in favor of more production here in the U.S."

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Fertilizer prices dropped dramatically in the last year, bottoming out last fall before rebounding slightly earlier this spring. Still, it's a farmer-friendly market after the last few years of high prices pinching corn profit margins.

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