Sep 23, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin

Budgeting Fertilizer for $4.99 December Corn

April 16, 2014
By: Davis Michaelsen, Pro Farmer Inputs Monitor Editor

As corn futures gather strength, the weather is giving many growers a little more time to plan for the upcoming plant. Our data shows that over the years, growers have dedicated 18% of expected new-crop revenue to fertilizer inputs. At $7.00 corn, that's a snap. But December futures prices currently range around the $5.00 mark.

For this analysis, we don't want to get too optimistic so we will use $4.99 as our Dec corn price. That pegs expected new-crop revenue at $758.40 per acre. Depending on your land costs, that puts a lot of growers 'in the money'. If we figure 18% of that, we arrive at a spring/summer fertilizer budget at $136.51 per acre. (Note: this analysis does NOT include fuels, seed or other operating expenses -- only fertilizer.)

At current prices, a 170lbs/ac application of NH3 costs an average of $70.55/ac. At current 59 1/2/lb P2O5, 100 pounds of DAP would cost $59.50/ac. Our total here puts us right around 18% already at $130.05/ac. Add another 100 lbs of potash and our per acre inputs bill swells to 22% of expected new crop revenue at $168.80/ac.

Interesting to note that as P&K demand has been expected to be low, a full application of NH3 and DAP pushes potash out of the equation. At current 38 3/4 cents/lbK2O, a 100 lb/ac potash application runs $38.75.

The above example with 170 lbs/ac of NH3, 100 lbs/ac DAP and 100 lbs/ac potash puts per acre inputs expenditures at $168.80 -- 22% of expected new-crop revenue with Dec. futures at $4.99. So what would you have to sell corn at to make $168.80 equal 18% of new-crop revenue? That number is $6.11/bu at 160bu yield.

Remember, all this talk of percentages and pounds means very little until cash sales are made. If you believe you can get $6.11 for a bushel of corn at harvest or sometime in the future after that, the full compliment of nutrient is the way to go. But I am advising conservatism. I have not heard anybody talk about $6.00 corn. I took it one step farther last summer when a grower told me that farmers expect to pay $200.00/ac for fertilizer. At similar nutrient proportions, a $200.00/ac application requires $6.94 corn to align with the 18% axiom.

Looking at it this way, one can see where the dictates of corn futures pricing can influence the decision making process. When the industry expects growers to cut back on P&K it is these sorts of numbers that lead them to that conclusion. Based on $4.99 Dec corn futures, 18% of expected new-crop revenue lacks about the $35.00 that a 100lb/acre potash application would add. Spending at the front end of the season must fall in line with sales expectations in order to maintain profitability and balance.




Previous 1 2 Next

See Comments


Log In or Sign Up to comment


No comments have been posted



Receive the latest news, information and commentary customized for you. Sign up to receive the AgWeb Daily eNewsletter today!.

Enter Zip Code below to view live local results:
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by|Site Map|Privacy Policy|Terms & Conditions