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Already book your fertilizer? If not, sit down before you read this

fotokostic/Getty Images Tractor spreading fertilizer on a field
Nutrient prices surge, adding $35 to $40 an acre to typical fertilizer bills for corn

If you haven’t booked 2021 fertilizer or checked prices recently, sit down.

In January I wrote about a surge in nutrient costs. That rally threatened to go hyperbolic last week, taking N-P-K markets to multi-year highs with triple-digit gains in some products.

Urea began the recovery from the depths of a COVID-19 bust in early summer. Bullishness spread to phosphates when the U.S. slapped anti-dumping tariffs on imports from Morocco and Russia. Gains gathered steam with rising crop prices this winter, then exploded in February as demand overwhelmed tightening supplies around the world.

Draining the pipeline

To be sure, many growers bought fertilizer last fall when prices were cheaper. But the heavy application season drained the U.S. pipeline of stocks. Refilling that inventory ran into a confluence of forces best illustrated by DAP.

Higher phosphate costs caused by the trade dispute were multiplied by the rising price of nitrogen needed for compound products. Another ingredient for 18-46, sulfur, doesn’t usually get much attention. But values of this vital nutrient have nearly tripled off pandemic lows.

COVID also drove the sulfur rally. U.S. production focuses on petroleum and natural gas processing, where it’s removed to make fuels like Ultra-Low-Sulfur Diesel. But a cratering economy cut energy production around the world. U.S. sulfur output last year fell 16% from 2018 levels, sending stocks to the lowest level in decades.

U.S. phosphate imports dropped 32% in 2020 due to the tariffs, and other producers faced their own hurdles. A frigid winter in Europe and Asia depleted supplies of natural gas, which is used as a feedstock for nitrogen fertilizers. Ammonia production in Trinidad suffered from production problems while China faced headaches of its own with natural gas output, affecting exports of both urea and DAP while its ammonia imports rose 9%.

Potash was the odd man out in the complex, with prices mostly flat through harvest, though apparent year-end U.S. stocks dropped to the lowest level since 1949. After modest gains earlier in the winter, costs at the Gulf gained $15 in the last two weeks as potash  jumped on the bandwagon.

Unsettling clues

So what do current expenses mean for your bottom line? A look at new offer sheets posted last week offers some unsettling clues.

February ammonia contracts at the Gulf settled for just under $300, which translates to an average retail value of $520. But growers in the heart of the Corn Belt can expect to pay more, with some dealers now above $600, nearly $200 more than last fall.

Urea, meanwhile, traded in a volatile $40 range last week at the Gulf, ending steady at $346, up $125 from harvest levels. So it’s not surprising that retail prices are closing in on $500, with offers last week running $460 to $500 after increases of $40 to $85.

UAN remains relatively quiet seasonally. Swaps for 32% at the Gulf eased $10 last week to settle at $211.50, but March is at $238. Retail costs for 28% are now running $225 to $245.

For their part, DAP values hit levels not seen in nearly a decade with the Gulf at $539, up $138 in just four weeks. That’s taken new offers to $650 and in some markets to more than $700.

Potash, finally, averaged $314 last week at Corn Belt terminals, with retail $390 to $420.

Add it together and these increases have added $35 to $40 an acre to typical fertilizer bills for corn. That translates to 20 cents or more per bushel of corn.

Is it enough to affect farmer planting plans this spring? You decide.

gulf dap

gulf urea
midwest terminal potash

Knorr writes from Chicago, Ill. Email him at brycemarkets@gmail.com
The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 
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