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Nitrogen Prices Could Push Growers Toward Soybeans in 2015

Nitrogen Prices Could Push Growers Toward Soybeans in 2015
U of I ag economist Gary Schnitkey analyzes fertilizer prices in the face of 2015 planting decisions.

By Gary Schnitkey

This article is from farmdocDaily. For the complete version, click here. Schnitkey is an ag economist with the University of Illinois.

Nitrogen prices could play a big part in shifting Illinois acres from corn to soybeans in 2015.

Anhydrous ammonia prices averaged $717 per ton in Illinois according to the October 2nd edition of the Illinois Production Cost Report. The 2014 price was higher than the 2013 price of $678 per ton. Changes in nitrogen prices between now and spring could influence plantings of corn versus soybeans in 2015.

Nitrogen Prices Could Push Growers Toward Soybeans in 2015

The September 2014 version of the 2015 Crop Budgets suggests that soybeans will be more profitable than corn in all regions of Illinois. This profitability outlook is unusual. Usually, corn is projected to be more profitable than soybeans. Commodity prices used in the budgets are $3.80 per bushel for corn and $9.75 per bushel for soybeans. Relative changes in these prices will change the relative profits of corn versus soybeans.

Changes in input costs also could impact relative returns. Nitrogen fertilizer price often is a major factor influencing relative costs of corn and soybean production. Decreases in nitrogen prices increase the profitability of corn versus soybeans and vice versa.

The $717 per ton price in October 2014 is $39 per acre higher than the October 2013 price of $678 per ton. This price change favors soybean production. However, the $717 price is $57 per acre below the $774 average price for the 2009 through 2014 production years. So far, 2015 ammonia prices are above 2014 levels, but below the average for the past six years.

From 2009 to 2014, the October anhydrous price of $774 per ton was $34 per ton higher than the April average of $740 per ton. However, within-year price changes can be large and of varying direction. To summarize changes between October and April by production year:

2009: Decreased from $1,153 in October to $658 in April, a decrease of $495 per ton.
2010: Increased from $431 in October to $540 in April, an increase of $109 per ton.
2011: Increased from $684 in October to $798 in April, an increase of $114 per ton.
2012: Decreased from $852 in October to $834 in April, a decrease of $18 per ton.
2013: Increased from $846 in October to $889 in April, an increase of $44 per ton.
2014: Increased from $678 in October to $720 in April, an increase of $42 per ton.

Prices increased in four years (2010, 2011, 2013, and 2014) and decreased in two years (2009 and 2012).

Nitrogen fertilizer prices could influence corn versus soybean planting decisions in 2015. Currently, budgets suggest soybeans will be more profitable than corn, potentially leading to acreage shifts away from corn to soybeans. Decreases in nitrogen fertilizer prices would increase corn profitability relative to soybeans, and vice versa.

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