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Will anhydrous ammonia costs tip the balance in the battle for acres?

Agriculture.com Staff 11/20/2007 @ 11:49am

In the battle for acres, one key variable is input costs and what it could mean for 2008 corn, soybean and wheat acres. Clearly, wheat inputs are on the low end of the spectrum, but with the corn market lingering on the high side, a farmer can justify higher input costs if he or she can lock in that sought-after target price, even if it means another year of continuous corn.

With the 2007 corn harvest in the books, farmers are now turning to fall fertilizer applications. Does the amount of anhydrous ammonia (NH3) leaving Midwest cooperatives and retailers foreshadow the size of next year's crop? If so, the 2008 corn crop could be a big one.

"There's a lot of anhydrous [ammonia] going out right now," says Dave Lund, location manager of Heart of Iowa Cooperative in Nevada, Iowa. "There's not going to be much switching acres around, at least around here."

Elsewhere in the Corn Belt, anhydrous sales are big -- enough so that farmers like Agriculture Online Marketing Talk member jkaahend says corn is surging ahead early in the battle for acres in his area of west-central Indiana.

"The local fertilizer plant is looking at a possible record amount of NH3 being applied this fall, with the combination of good corn prices and great weather for getting it applied here," jkaahend writes. "That has changed greatly in the past few weeks. The talk a month ago was more beans, to avoid the high input costs of corn."

The jump in sales have made NH3 concerns a common thread in corn country. In central Illinois, Farm Business Talk member ILStUFH has watched orders eclipse supplies at his ammonia facility, and filling those orders is only contributing to the rising costs.

"Pretty much any plant around here in central Illinois is out of its allocations for this fall. At the plant where I work, we are 300 tons over what we were allocated. So we have ours coming from Henderson, Kentucky, six hours one way," ILStUFH writes. "We were told that, once we are out of what is coming in from Kentucky, the price is going up. We are looking at around $610 to $620 next spring. Ridiculous."

Even if the market tilts in favor of soybeans -- as high as $10 per bushel -- that may not be enough to convince farmers to abandon a corn-heavy rotation. At least not under current market conditions, says Marketing Talk membercoup.

"It looks like there will be more of an increase in corn acres than the increase from the previous year," coup says of his outlook for '08. "Soybean acres in '08 are in real trouble. $10 beans sure hasn't got folks interested.

"From the looks of things, corn acres in this part of Illinois will increase about as much in '08 as they did in '07. Beans are going to need to be put on the endangered species list."

With all the NH3 leaving Corn Belt cooperatives and retailers this fall -- so much that some outlets are running short on supply -- that means corn is winning the battle for acres, right? Not so fast, says Iowa State University farm management specialist Don Hofstrand. Hofstrand, who closely follows the relationship between the energy and commodity markets, says a return to more corn in '08 isn't the sole reason for the exodus of NH3 this fall. It's definitely on the battlefield, but potential increases in NH3 prices in the spring are weighing more on farmers' minds.

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