Agrium: NPK Priced to Profit Growers in 2013/14

May 15, 2013 08:29 AM
 

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Agrium Inc. has released projections for the 2013/2014 corn crop along with a recap of 2012/13 crop action. The assumptions made by this ag giant suggest fertilizer pricing ahead will stay within a profitable range. The Inputs Monitor has maintained that strong pricing resistance lies at 18 percent of expected new-crop revenue, and if Agrium's expectations play out, growers will pay less than that percentage to grow corn in 2013/14.

2012/13 --

The corn price for this analysis is at $6.84/bu. with an average corn yield of 123 bu/acre. Given that, new-crop revenue averaged $810.57 and NPK pricing added up to 15.2 percent of that. In other words, 15.2 percent of new-crop returns was enough to cover total NPK in 2012/13.

2013/14F --

This analysis reflects lower expected corn pricing, but yields at trendline, and even a little above at 161 bu/acre. With a larger crop, corn prices would fall to $5.27, totaling just $798.56/acre in new-crop revenue. This would have NPK pricing a little higher than the year before at 15.8 percent, but still well within a profitable range.

Pro Farmer's projections are not quite as optimistic for 2013/14 at 152 bu/acre yield. Average corn yield at that level would increase the percentage of new-crop revenue dedicated to NPK to 16.6 percent.

What is telling is Agrium's projected fertilizer price which has ammonia at $860.00/short ton; DAP at $575/st and potash at $530/St.

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These P&K prices are substantially lower than current retail pricing which has DAP at $635.38/st -- $60.38 above Agrium's projected average price. Same story with potash, which is currently at $586.37 in our retail index -- $56.37 above Agrium's projections. Ammonia is expected to fetch $860/st -- $14.43 below current retail pricing.

Written between the lines is Agrium's expectation of mild to moderate declines in retail NPK pricing with the largest dip coming in P&K. Ammonia is thought by some to have some competition from urea as an alternative source of N, but by the pound of N, anhydrous ammonia remains at 52 cents while urea is at 63 cents per pound of N.

Uncertainty is part of life on the farm, and risk must be managed in order to succeed. Agrium's view is wide, and if their fertilizer pricing expectations are realized, or even low by 2.5 percent, NPK pricing as a percentage of new-crop revenue will remain favorable for the 2013/14 crop.


Photo credit: D. Michaelsen -- Inputs Monitor

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