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Fertilizer trends tough to predict

Jeff Caldwell 01/10/2012 @ 2:57pm Multimedia Editor for Agriculture.com and Successful Farming magazine.

What kind of crop rotation will be most lucrative for you this spring depends a lot on input costs. And, the most volatile crop input from recent years looks to be the leader again this year.

Looking back over the last 3 years, there's been a major swing each year between fall and spring prices for fertilizer -- anhydrous ammonia, diammonium phosphate (DAP) and potash. Between 2009 and 2011, that trend was higher from fall to spring. But, that's far from enough of a trend to base purchase decisions just yet, says University of Illinois ag economist Gary Schnitkey.

"This decreasing pattern exists primarily because of the dramatic price decreases occurring in 2008-09. Comparing of price patterns across all three years does not suggest a predictable pattern between fall and spring prices," Schnitkey says.

For anhydrous ammonia, prices increased by $338/ton between fall 2008 and spring 2009, increased by $83/ton between fall 2009 and spring 2010, and increased by $56 between fall 2010 and spring 2011, according to Schnitkey. The price action's about the same for DAP: Prices fell from fall 2008 to spring 2009 by $443/ton, increased $101/ton between fall 2009 and spring 2010 and moved up $29/ton between fall 2010 and spring 2011.

Potash followed a slightly different path, though, slipping by $79/ton between fall 2008 and spring 2009, $71 between fall 2009 and spring 2010, but increasing by $55/ton between fall 2010 and spring 2011.

"Some years prices decline between fall and spring and other years prices increase. Overall, these patterns do not suggest predictable seasonal patterns. Hence, recent price patterns do not suggest one time period is better for purchasing fertilizer than another period," Schnitkey says. "Evaluating prices over a longer time-period might change implications."

On the bright side, though, there's starting to be some reason that fertilizer prices could be lower this spring than they were in the fall, Schnitkey says. Prices have fallen some at the Gulf of Mexico in New Orleans, Louisiana, the major port for imported fertilizer. And, more production's being brought online around the world, and more supply could possibly mean slackening demand and lower prices.

"Prices are coming down for nitrogen and anhydrous at the New Orleans area. It's softening," Schnitkey says.

But, what if all signs point to more corn acres this spring? If that's the case, you might as well throw out any trend that you think could influence prices.

"If we continue to see corn prices increase, that softening could be off," Schnitkey says. And that may not take long to happen. "It could be a pretty quick transition," he adds. "It's hard to say how many are buying now, but there are a lot of farmers looking."

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