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Drivers for Success in 2014: Input Analysis

December 7, 2013
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Saving money on the farm can be just as valuable as making money, especially when margins are tight. The key is knowing where you can pick up some cost savings without short-changing your crops and profits in the process. For 2014, economists say look no further than fertilizer.

Since this past spring, nitrogen prices have dropped 22%, while potash and phosphate prices are down about 19%, according to Alan Miller, Purdue University farm business management specialist.

"Prices [for nitrogen] will continue to be under downward pressure, particularly if farmers respond to the incentives and shift more corn acreage to beans or reduce their total corn and bean acreage in 2014," he says.

At press time, anhydrous ammonia was about $650 a ton, roughly $145.25 lower than 2012.

David Asbridge, president and senior economist for NPKFAS, a fertilizer advisory service, says he expects urea prices to dip to $440 per ton in early winter. He also forecasts UAN 32% nitrogen to drop from the Midwest average of $420 per ton to $360.

Potash is also likely to tread downward this winter, perhaps another 5%, Miller says, based on current market-share competition between manufacturers in Russia and Belarus.

Chad Hart, Iowa State University (ISU) agricultural economist, offers farmers a cautionary note about fertilizer prices. "When companies get into these shoving matches, depending on which way they’re shoving, those costs can go up or down quickly," he says.

Davis Michaelsen, Pro Farmer crop inputs editor, says he believes fertilizer prices have bottomed out. In fact, he expects a jump to $700 to $720 per ton for anhydrous ammonia as we move into 2014. He encourages farmers to book their nitrogen now.

Because fertilizer prices can change rapidly, Hart tells farmers to address price uncertainty by locking in some revenue at the same time they purchase inputs.

"When I buy my fertilizer, maybe I market 5% of my crop at the same time to take some risk off the table," Hart explains.

From an energy standpoint, the price of farm diesel in 2014 is dependent on winter conditions. Supply is good and prices are expected to drop, but extreme cold could push diesel prices higher. "A good target price is $3.25 to $3.30 per gallon," Michaelsen says. "If you can get that, you should book 20% to 30% of your spring needs."

Seed is one input where prices have increased. Miller anticipates that corn, soybean and wheat seed prices will be up 2% to 3%.

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RELATED TOPICS: Farm Business, Inputs, Seed

 
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