What is in this article?:
• If you’re buying for the spring market, it makes sense to buy most of your diesel during February.
• A large share of U.S. fertilizer needs continues to be imported and that makes it difficult to predict what prices will do in the future.
• Interest rates continue to be low, so borrowing, if you can get money, shouldn’t be a problem. The issue is whether or not your bank is loaning money.
Fertilizer use by region
Looking at fertilizer use by region, North America currently uses about 14 percent of the world’s fertilizer while China uses 28 percent and India uses 14 percent.
“Before 1992, fertilizer prices were fairly easy to predict, but it has become much more volatile. Going into 2012, we’re looking at a lot higher prices than we saw back in 2010. We’ve seen a steady increase in fertilizer prices since the summer of 2010.”
A large share of U.S. fertilizer needs continues to be imported, he says, and that makes it difficult to predict what fertilizer prices will do in the future. The United States imports 55 percent of its nitrogen or 10.57 million tons and 81 percent of its potash or 6.92 million tons.
“But we are a leading producer of phosphate, producing 90 percent of the world’s use and exporting 44 percent of what we produce. So at least the U.S. has some control over phosphate.”
Someone would think that natural gas would be a leading indicator of the price of nitrogen fertilizer, but there’s too much variability there, says Inbendahl.
“But there is some correlation when we predict spring anhydrous ammonia price based on the October oil price. With this model, $80-per-barrel oil equals a price of $661 for anhydrous ammonia. If I was a farmer, I wouldn’t be in a hurry to purchase my fertilizer for next spring. There’s a chance the price might come down. Also, $80 oil translates into $496 urea prices.”
As far as the labor and wages side of things, he says, unemployment continues to be high. “This is actually a good thing for agriculture if you’re looking to hire somebody because there should be plenty of people looking for a job. And wages haven’t increased much either.”
Interest rates continue to be low, says Ibendahl, so borrowing, if you can get money, shouldn’t be a problem. The issue is whether or not your bank is loaning money.
“Prices have increased somewhat for chemicals. But Roundup prices have dropped significantly, so if you have Roundup Ready crops, the price is a lot less than a couple of years ago.
Machinery prices have bumped up with combines being up 7 percent in 2011, cotton pickers up 9 percent, and 150-horsepower tractors up 8 percent.”