Crop input cost predictions
Look forward to spending more money this year with some bigger profits to follow. Ohio State University ag economist Barry Ward says, "Input costs have increased from last year, but high crop future prices for 2013 crops will allow producers to plan for positive margins next year.”
Ward has made predictions for 2013 pertaining to Ohio's three main crops of corn, soybeans, and wheat broken down into five inputs whose prices will most directly influence the outcome of crop profitability: fuel, fertilizer, nitrogen, phosphorous, and potassium.
The cost of oil makes everyone hold their breath for a second, but farmers can let go of some of the stress and anxiety this year created by a fear of rising crude oil costs. Crude oil price has decreased by 7.3% from 2012 according to the Energy Information Administration (EIA) due to the tightness of the market.
“Fertilizer continues to be the most volatile of the crop input costs, and cost management of this important input may be the difference in being a low-cost or high-cost producer in 2013,” Ward says.
Fertilizer and its components have some similar traits that influence fertilizers' price. For nitrogen, phosphorous (P2O5), and potassium (K2O), a slow world economy could lead to a decrease in their price. A strong farm balance sheet, high crop prices, and profitability could mean an increase in their price. The drought causes imbalance within travel of freight up and down the river in the Midwest region that could ultimately affect price of transport.
The price of corn will directly affect the price of nitrogen because they are highly correlated. Then there is the price of natural gas, which is relatively low at the present, and if the price stays low, then this could lend a hand in the decrease of the price of nitrogen this year. A factor that could have an effect on nitrogen prices increasing is large corn acreage prospects for the U.S. More domestic nitrogen production being built could deflate the price of nitrogen.
Both diammonium phosphate (DAP) and monoammonium phosphate (MAP) have had a 9% decrease in price from a year ago in comparison to the price of November/December. Residual soil P could lessen demand because of drought therefore decreasing the price of phosphorous.
Potash retail price in December in Ohio was $555 to $640 per ton, a 7% decrease from a year ago. Ward also believes the potash industry works as a duopoly with two companies controlling the market together. These companies are Canpotex (Canadian Potash Exporters) and Bellarussian Potash Company.
If the potash producers begin to curtail production, then this may lead to an increase in price of potassium. The price could decrease if residual soil K has lesser demand because of drought.