Farmers Urged to Lock In Part of Their 2017 Fertilizer Needs Early
The good news is that seed prices have remained fairly steady from 2016 going into 2017.
The bad news, though, is that steady doesn’t match the decline of corn and soybeans prices from last summer’s spike.
“The price of some products has gone up, some prices have gone down, but, overall, we are pretty flat from where we were in the past year,” says Jeff Hartz, director of marketing for Wyffels Hybrids.
The decline in commodity prices has prompted farmers to economy-shop for seed.
“We have started to see growers become more sensitive to the price of seed and to trade down,” says Ponsi Trivisvavet, president of Syngenta Seeds. “They are choosing hybrids that have a lower number of traits. Within the same trait class, we have also seen a trend of growers move into picking the lowest-priced hybrids.”
These also tend to be older ones, she adds.
This year’s trend isn’t deterring Syngenta from research and investment in seed and traits, though. “We are in it for the long term,” she says.
Cutting traits is a way to save money. Remember, though, that pests such as corn rootworm and European corn borer (ECB) still lurk.
“Farmers have to be careful that they don’t get into a situation that can backfire,” says Hartz. “They are still there. We saw some fields in eastern Iowa that were non-GMO that had an issue. We saw that in 2015, too, where corn borer cost farmers 30 to 40 bushels per acre in yield.”
There’s good news on the fertilizer front.
Prices for the big three —nitrogen (N), phosphorus (P), and potassium (K) – had plunged to around their lowest levels since 2007 two to three months ago, says David Asbridge, president and senior economist for NPK Fertilizer Advisory Services.
“We have had way too much capacity across the board with N, P, and K, but they (manufacturers) are beginning to manage it somewhat,” he says. “China is a big factor in this. The country shut down a lot of its nitrogen and phosphate plants—not completely, but it helped the market a bit.”
For the most part, prices will likely remain steady through winter, but they will start rising in March through the end of spring. This coincides with heavy fertilizer use during and shortly after planting. Prices will then drift lower before again rising (albeit at a lower level than in spring) in the fall.
“At this point, because of overwhelming capacity, we don’t see any big price hike,” he says.
Except . . .
One factor that’s changing the N market is the opening of three large-scale plants in the U.S. “They are the first ones like this built in the U.S. since the 1960s,” says Asbridge.
Last year, CF Industries Holdings, Inc. opened a ammonia/urea/urea ammonium nitrate (UAN) plant in Donaldsonville, Louisiana. This firm has also built a $2 billion expansion for a new ammonia plant, followed by a urea synthesis and granulation plant at Port Neal, Iowa. It wasn’t open at press time, but it is expected to open any day. Iowa Fertilizer is also building a new ammonia/urea/UAN plant in Wever in southeastern Iowa.
“That one they have been pushing back on, saying it will be up and running by mid-February,” says Asbridge.
If the Iowa plants don’t open, price spikes – particularly urea and UAN – could occur, as markets have been anticipating their opening. That’s why Asbridge is recommending to clients to lock in about 40% to 45% of anticipated urea and UAN needs soon.
“If, for whatever reason, Wever doesn’t open up in mid February, there could be issues with procurement, particularly urea and also UAN,” he says. Anhydrous ammonia supplies should be adequate, he adds.
K and P
Industry overexpansion has throttled down the potash market, with about one half of the Canadian industry shut down, says Asbridge. This – along with a fall run on potash – helped perk up K prices a bit.
However, the fall run will take some of the pressure off the spring market, he says.
“Phosphate is the same way,” he says. “Mosaic is the biggest phosphate producer in the U.S. It has throttled back in the last few months, but production is picking up a bit now. This, combined with new phosphate plants being built and opening in Morocco, is keeping a cap on phosphate prices.”
To head off any upticks during the heavy spring-use season, Asbridge is recommending his clients lock up one third of their phosphate and potash needs by the end of January.