More fallout from the energy problems this winter --

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Fertilizer prices shoot upwards

By Larry Reichenberger Crops and Machinery Editor

Successful Farming

Fertilizer prices are increasing dramatically across the Midwest. Dealers in Kansas will raise the price of NH3 by $55.00 per ton on Monday to a price of $330.00. Farmers rushing to book the product at existing prices were generally unable to find adequate supplies. The increase marks the largest ever one-time step in NH3 prices.

The price of other nitrogen fertilizer products is also increasing rapidly. Urea (46-0-0) will shoot to $235.00 per ton, up $14.25. Liquid nitrogen (28-0-0) will increase $25.00 per ton to $175.00 and the price of starter fertilizer (10-34-0) will increase from $210.00 per ton to $235.00.

The rapid increases are the result of a similar increase in the price of natural gas, the primary feedstock in NH3 production. Gas prices have quadrupled over prices one year ago and many fertilizer manufacturers are shutting down production as a result. On Thursday, Agrium, Canada's second-largest producer, announced it was cutting output at five of its North American plants resulting in a 17% decline. Also, on Monday, US manufacturer Terra Industries announced it was idling production at a plant in Oklahoma along with shut downs announced earlier in Arkansas and Texas. And, Farmland Industries has told its dealers it will not reopen its facility in Lawrence, Kansas with crippling gas prices. Representatives from Farmland told dealers that, at current gas prices, the feedstock alone to manufacturer a ton of NH3 would cost $350.

12/15/2000 01:24 p.m.CDT

http://www.agriculture.com/default.sph/AgNews.class?FNC=side BarMore__ANewsindex_html___44560

-- Cash (cash@andcarry.com), December 19, 2000

Answers

Since I don't use commercial fertilizers, can someone here (Ken?) speak to the effect this will have on food prices and crop production if prices stay up? (Which, according to just about everything I've read lately, is entirely likely.)

-- Cash (cash@andcarry.com), December 19, 2000.

Farmers will basically have two options: cut down on production (lower crop yields)or try to maintain the same levels by paying more for fertilizer. In either case they lose.

Then you have to remember farmers buy at retail and sell at wholesale. If wholesale prices don't go up accordingly, farmers lose again.

If wholesale prices do go up, inflation goes up and they have to pay more for just about all inputs, not just fertilizer. They lose again.

I think now you can figure out why the number of farmers in the U.S. is declining.

-- Ken S. in WC TN (scharabo@aol.com), December 19, 2000.

If all farmers cut input and lowered yeilds, prices would rise and they would be happier, though most consumers would not. Unfortunatly, because we pit small farms against corporate, deep pocketed giants, and the little guys end up competing amongst themselves rather than cooperating with each other this will not happen. There is a third option, look for crops to grow in which you can actually make money. Not an easy decision to make, but if done with due diligence much better in the long run.

-- ray s (mmoetc@yahoo.com), December 19, 2000.

As usual, Ken hit the nail dead on the head. NH3 (as well as other nitrogen sources derived from it) is primarily used on grain crops including wheat and corn. Shortages from manufacturing facilities increases the prices in storage as well as those that will be manufactured. These increases will be passed on to farmers. Before you say "I'm not a big farmer" let's drag this out a little farther, for argument's sake.

Grain crops in this country mainly go to feed livestock. If production costs for corn (for example) double due to increases in fuel, transportation, fertilizer, etc. and prices remain at current levels, corn acreages will be down (not planted). Farmers in the Southeast barely broke even the last couple years. Price increases at estimated levels would put them out of business. Now corn in "reserves" increase in price.

How does this make any difference to "mainstream America"? Tell them their McBurger just tripled in price or their 2-piece KFC meal will cost them "$14.27, or baby back ribs - price prohibitive, and I think you get the picture.

You will have to figure out just how it could affect you. Pre- packaged meals aren't much of a concern for most of us. But what about feed, or grocery items and the list goes on.

And we thought Y2K was a concern!

-- Debbie M in ne NC (demeads@inteliport.com), December 19, 2000.

Ray S:

What usually happens is farmer follow current fads when they do this. (Remember when Presidental Candidate Michael Dukausis (sp?) told American farmers to plant Belgium Endive?) Say ten percent switched to Belgium Endive because the price is good this year. Next year Belgium Endive floods the market and the price nosedives. Trying to cater to a speciality market can be extremely fustrating.

OK, switch to large scale market gardening. Where is the extra manpower going to come from?

There are no easy answers.

-- Ken S. in WC TN (scharabo@aol.com), December 19, 2000.

Ken- Hence the due diligence part of my answer. I would also suggest never listening to a government agency telling you what or how much you should plant. Much of the current problem goes way nack to the ag. dept. suggesting planting from ditchline to ditchline and sometimes beyond. Twenty years later they pay people not to plant "marginal" land and advocate conservation tillage to try to correct the environmnetal problems that started to occur when fencerow were torn out to create more tillable land. Due diligence means planning for the long term success of your farm, not just figuring out how to pay the bills this year.

-- ray s (mmoetc@yahoo.com), December 19, 2000.

Will use of nitrogen producing crops ever make any impact on large scale farmers? I have been studying about use of legume and grass crops to increase nitrogen levels. Would larger scale operations be able to benifit from alternate planting?

-- Jay Blair in N. AL (jayblair678@yahoo.com), December 19, 2000.

I read and am trying a new method of supplying Nitrogen. Crop rotation with legumes followed by corn will supply not only all the Nitrogen needed but improve the soil at a big savings. It does take planing and more room but it is a good solution. Also underplanting with legumes works quite well and is a natural mulch

-- Nick (wildheart@ekyol.com), December 20, 2000.