Custom Application Rates & Input Costs -- For Optimists Only

May 3, 2013 09:42 AM
 

Custom fertilizer application rates vary according to availability of machinery, timing, operator skill, field topography, crop conditions and the performance characteristics of the machine to be used. Side dress rates have been recorded only since 2012, but follow the same general trend as other applications year-over. The following table shows custom fertilizer application rates reported to Iowa State University Extension since 2008 for a variety of methods.

With the price of December 13 corn futures assumed at $5.50, expected new-crop revenue lies in the neighborhood of $846.40/acre. Given that, 18% of new-crop revenue -- a key fertilizer pricing resistance point -- adds up to $152.35/acre for NPK. But if the cost of custom application is added in, growers could find themselves paying as much as $164.75/acre for total NPK custom applied. That figure is closer to 19.5% of per acre expected new-crop revenue -- on average, a 1.5% increase in inputs costs/acre. At that level, farmers generally begin to examine their expense-to-corn revenue ratio.

 
Dry bulk/acre
Liquid Spray/acre
Liquid Strip-till knifed/acre
Liquid Side dress/acre
Anhydrous Injecting w/ tool bar/acre
Anhydrous Injecting w/o tool bar/acre
Spreading lime/acre
Diesel price assumed/gallon
2013
$4.95
$6.50
$12.30
$11.60
$12.40
$10.70
$6.30
$3.50
2012
$4.50
$6.70
$14.55
$11.25
$11.50
$9.85
$5.75
$3.25
2011
$4.05
$5.85
$13.25
not reported
$10.30
$9.35
$5.85
$2.75
2010
$4.15
$6.00
$13.25
not reported
$9.75
$8.70
$6.10
$2.25
2009
$4.10
$5.80
$12.30
not reported
$9.50
$8.90
$7.00
$2.50
2008
$3.75
$5.30
$12.90
not reported
$8.75
$8.75
$6.40
$2.75

 

If the price of December corn can find some strength, it would go a long way to easing this percentage which had been right at 16.3% for most of the winter. As product was booked at December 2012 levels, an additional point-and-a-half increase would put fertilizer costs right back at the 18% mark signaling more growers than not would be able to cover the extra expense of custom applications without breaking the bank.

So far, opportunities for soil testing have been limited by unfavorable soil conditions this spring. That being the case, I expect growers to apply at traditional rates -- playing it safe -- fearing a reduction in N/acre will show up at harvest as lackluster yield. Six dollar corn would help growers sleep a little better at night as the price of a full docket of nutrient custom applied at $164.75/acre would shrink back to 17.9% of expected new-crop revenue.

That is a figure growers have proven they can live with, and profit by. This year, with December corn futures waffling well below $6.00, the question of whether to pay for custom applications or not may come down to the simple difference between optimism and pessimism regarding corn futures.


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