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Fertilizer a Key Variable in Corn, Soybean Crop Cost Containment

Corn and soybeans are cheap and getting cheaper. Profits may be out the window for this year on a lot of row-crop farms. Yet the downturn was well foreshadowed. Now that it's arrived, there's a new buzz term in the Corn Belt: cost containment.

"It appears that the key for a while will be cost containment," says Agriculture.com Marketing Talk senior contributor elcheapo. "I've always found it interesting to compare the cost of items in different areas. I've often felt we are in a black hole in my area, where the fertilizer is higher and basis is wide."

Fertilizer is actually the rare input that's seen as declining in cost in the next year or so, says University of Illinois Extension ag economist Gary Schnitkey. But the average decrease of less than $20 an acre for corn and around $6 an acre (for Schnitkey's state of Illinois) isn't enough to make up the discrepancy between projected crop income and a bottom line that's not in the red. And these declines are far from sure things.

"These cost decreases are based on further decreases in fertilizer prices, an uncertain proposition. Increases in demand for natural gas caused by another cold winter in 2014 could result in higher fertilizer prices for 2015," Schnitkey says. "Moreover, much of the raw ingredients for fertilizer production is located in politically sensitive areas of the world. Supply disturbances in those areas could result in higher fertilizer prices."

You can't do much to control the prices you'll pay for fertilizer, beyond going to a different supplier. There are ways, however, to get more out of what you pay, and that's now become a big target for farmers who are already looking ahead to a year with little or no crop income because of a depressed marketplace for corn and soybeans.

"If you use enough dry fertilizer to take it by the semi load, it's way, way cheaper to have your own cart and bypass the local co-op or whomever," says Marketing Talk esteemed adviser Hobbyfarmer. "I have three places to call for direct shipping right to my farm. Just takes an auger and somewhere to put it, as trucks will not wait for you to spread it. If you have your own semi, even better. Been pretty easy to buy a good serviceable 8-ton spreader for under $3,500. That's about the savings on one load of 11-52-0."

Also consider buying your fertilizer during different times of year. If you've got the ability to store it for a little longer period of time, you may be able to net considerable savings in price.

"Seems to me the big savings would be buying in the off-season. I'm not set up to store fertilizer and don't know if I want to be," adds Marketing Talk senior contributor clayton58. "Almost all my fertilizer goes on at planting time with the air seeder, so that eliminates off-season applications."

And, though it may require spending more money, not less, at the outset, new technology can help you keep your fertilizer applications streamlined so you're not spending more money than you have to. If you're not already using variable-rate application systems, Marketing Talk senior adviser ECIN says you could tighten your fertilizer budget, possibly to the extent that you can pay for the new tools in a year or two.

"I'm doing a variable-rate deal. I have never been so happy with the results I have gotten," he says, adding he's got a 125-acre field near a hog farm where he's had manure applied for years only to learn that nutrients were severely imbalanced once he conducted thorough variable-rate soil tests. "Now, we only spread where we need it. This is my way to save. I guess the only drawback is if you wanted to do it yourself, then you would need the variable-rate equipment. But from what I have seen so far -- on the bigger farms -- it would not take long to pay for itself."

ECIN says he thinks that in two years, on that 125-acre field adjacent to a hog farm, he's saved $18,000 on his fertilizer bills.

"At first, this technology thing bugged me, but by working with it over the years, now I love it," ECIN adds.

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