KANSAS CITY — Fertilizer costs have stabilized or declined barely within the 5 months since Russia invaded Ukraine, however stay a lot larger than in 2021, so growers who purchase early to begin planning crops of 2023 is not going to get the identical financial savings as earlier than. final yr.
These findings and different expectations for the fertilizer market in 2023 come from analysis carried out by the Division of Agricultural and Shopper Economics on the College of Illinois at Urbana-Champaign and printed in Farmdoc Each day on July 19.
In 2021, farmers who purchased nitrogen-based fertilizers forward of time paid a lot lower than those that waited, the financial researchers mentioned. From July 2021 to July 2022, anhydrous ammonia costs elevated from $726 to $1,469 per ton; diammonium phosphate (DAP) rose to $983 per ton from $688, and potash rose to $862 per ton from $481.
These value will increase began piling up earlier than the Japanese European warfare broke out. Instantly after the Russian invasion, the costs of fertilizers, grains and oilseeds skyrocketed. By July, the costs of these three commodity classes fell again near pre-war ranges in January 2022, indicating an obvious absorption of the shocks of the battle by the markets.
The excellent news for farmers planning for the 2022-23 crop yr is that fertilizer provides for the Western Hemisphere seem enough, the UI economics crew mentioned. However the fertilizer price outlook for anhydrous ammonia is carefully tied to the route of corn and pure fuel costs. For the previous, costs reached a month-to-month common of $eight.14 per million BTU in Might and $7.70 in June, effectively above latest averages and the very best ranges since 2008.
The most important driver is corn costs, the article mentioned, which have fallen to pre-Ukraine warfare ranges however stay at comparatively excessive ranges.
“Present corn costs level to comparatively excessive nitrogen fertilizer costs, however a continued drop in corn costs might sign the potential of additional declines in nitrogen fertilizer costs,” the UI research mentioned.
Nonetheless, the report pointed to geopolitical potentialities that would push costs larger as soon as once more. Russia has slowed pure fuel provides to Western Europe citing pipeline upkeep. An extra discount or full closure of that pipeline would increase the worth of nitrogenous fertilizer manufacturing in Europe and probably set off a recession that might have an effect on all grain and fertilizer markets. Second, there are issues that high fertilizer exporter China might prohibit outflow of provides. Extreme COVID-related restrictions in that nation have raised fears of a Chinese language recession that would depress grain gross sales to China, and thus US grain costs.
Finally, US farmers are dealing with a lot larger fertilizer costs yr after yr and maybe extra market uncertainty than common, the report concluded.
“Given this uncertainty, farmers shopping for nitrogen in late summer time or early fall might wish to value in 2023 corn manufacturing,” the UI crew mentioned. “Excessive corn costs are wanted to cowl excessive nitrogen costs. If the gross sales are usually not made on the similar time, corn costs might lower between the time of the nitrogen buy and the time of the corn sale.”
Farmers contemplating their choices might delay nitrogen purchases or unfold purposes between fall and spring to unfold value danger, the report concluded.
“If contemplating post-plant software, farmers can take into account PACE, a crop insurance coverage product that may be a backup to the COMBO product,” the UI crew mentioned. “That endorsement will cowl monetary losses if the nitrogen can’t be utilized after software because of causes coated by the coverage.”
