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.