How farmers should manage fertilizer prices
Farmers who forward contract grain but don’t do the same with fertilizers are not farmers – they’re speculators, says Josh Linville, senior risk manager in the fertility division at the StoneX Group. And in late 2020 and early 2021, that was a bad place to be.
“If you sell that corn, and inputs go sky high, you’ve lost,” Linville said in a phone interview with Successful Farming.
As recently as last fall, production issues had tightened global supplies. Crop prices had not yet responded to the grain pinch.
“Grain prices were terrible. Farmers said they didn’t know how they would cash flow their crop,” he recalls. “But 60 days later, farmers became flush with money.”
It was a perfect storm of factors that came together: tight grain supplies, higher demand for grains and higher grain prices. Meanwhile, global fertilizer manufacturing and supply tightened.
Farmers who didn’t lock in fertilizer for the 2021 crop may feel pinched about the fertility program headed into the growing season. In a blog post on the Minnesota Crop News website, Dan Kaiser, nutrient management specialist at the University of Minnesota Extension, says there are some strategies to deploy:
- Don’t cut fertilizer rates to cut costs. Nitrogen will always provide the biggest bang for the buck on corn, Kaiser says, as it is typically the most limiting nutrient. “The need for phosphorus (P) and potassium (K) for a crop is highly dependent on management philosophy,” he says in the blog. “The soil can contain enough of each nutrient that it may be easier to cut down on P and K than N or sulfur (S), which readily leach from the soil in their crop-available forms.”
- Think twice about micronutrients. “The simple fact is that you cannot afford to cut nutrient applications such as N, P, K, and S for the sake of applying micronutrients that likely will not have a high return on investment. The $5 per acre you may spend on micronutrients would be better spent on nutrients which form the foundation of your nutrient management program,” Kaiser writes.
- Pay attention to P and K soil test results. “Our recent research has shown that applying as low as 40% of crop removal of P and K has been able to keep the soil test near optimal levels while not reducing crop yield in the short-term,” he says. That strategy could result in lost yield potential in the long-term, if the soil test levels drop to where higher rates of fertilizer are needed to maximize yield, and the same rate of fertilizer is applied year after year without testing the soil. “If nutrients are needed for the crop, that application is better than nothing,” Kaiser continues. “If you are managing fertilizer to the point where you are applying only what the crop needs, more frequent soil testing is needed to monitor soil tests to catch situations where soil tests decline and more fertilizer may be needed.”
- Account for the nutrients applied. “Credit nutrients in any starter fertilizer you are planning to apply. If you applied MAP or DAP in the fall, credit the N in those products,” he says.
- Be wary of fertilizer enhancements and soil amendments. Products that have not been proven to consistently increase yield may be a good place to trim costs, Kaiser writes.
Going forward, heed Linville’s advice to make solid financial decisions, just as a shrewd chief executive officer would do so with his or her business: look at both sides of the price equation. Not just the prices received for grains, but the price paid for crop inputs.
Also, don’t be afraid to stay in contract with your fertilizer retailer.
“They want to help farmers out more than the farmer gives them credit for. Many times retailers have better information than farmers do. They can help farmers plan ahead,” he says.