As fertilizer prices climb, it's important to size up the agronomic potential of each corn field and run the numbers for that ground to see what the per bushel return is for inputs invested in the crop.
The rules for fertilizer just keep changing. Even though fertilizer prices increased dramatically from 2001 until 2008, it still required about the same number of bushels of corn—the real cost of fertilizer—to pay for nitrogen (N) and removal rates of phosphorus (P) and potassium (K). Now, with fertilizer prices taking another quantum leap in 2009, the real cost climbs.
Farm Journal Field Agronomist Ken Ferrie relates the cost right back to the bushels the fertilizer helps produce.
"To determine the real cost of fertilizer, look at your yield history,” Ferrie says. "For example, say you are averaging 180 bu. of corn per acre. Calculate the amount of phosphorus and potassium that is removed by that yield.”
Then, translate the cost of that fertilizer into bushels of corn. "If the fertilizer required by crop removal cost $50 per acre a few years ago, when the price of corn was $2 per bushel, it required 25 bu. of corn.”
The general ratio in that equation has held true for the past eight years, whether corn sold for $2.38 a bushel or $4.75. To walk through the numbers, see the "Cost of Fertilizer in Bushels” table compiled by Mark Baer of Sun Ag Supply in Tremont, Ill., on page 26.
You can see the same thing in budgets prepared by University of Illinois ag economists Gary Schnitkey and Dale Lattz, based on data from Illinois Farm Business Farm Management records, at www.farmdoc.uiuc.edu/manage/index.asp. Scroll down to "Per Acre Revenue and Costs for Illinois Crops.”
Those budgets show it was possible to net significantly more income, even with higher input prices—as long as you maintain yield. That's an argument for not cutting back on fertilizer.
But look what's happening to fertilizer prices in 2009 (as if you hadn't already noticed). In early September, early prepay prices at Sun Ag were $1,160 a ton—up $864—for mono-ammonium phosphate and $970 a ton—up $470—for 0-0-60 (potash). Anhydrous ammonia jumped from $560 per ton to $1,080 per ton. Those prices appeared to be pretty typical for central Illinois.
Between 2008 and 2009, the cost of N, P and K removal rose from $110 to $249.50—an increase of $139.50 per acre. At $6 per bushel, it takes 41.6 bu. of corn to pay for the fertilizer, compared with 23.2 bu. in 2008.
Using budgets on the farmdoc Web site, for land in continuous corn yielding 173 bu. per acre with $160 per acre land cost, increasing fertilizer cost from $110 per acre to $249.50 slashes net profit from $344 to $204.50 per acre.
"Depending on your costs and yields, there's still money to be made, even at 2009 fertilizer prices,” Ferrie says. "But now you have to do your homework. Yield and other costs like land really come into play.”
- October 2008