January 30, 2009

Over the past several months, the wholesale price of fertilizer has declined, dramatically in some cases. Now, producers are beginning to see retail prices drop, but these declines are varying greatly between stores, said specialists with the University of the Kentucky College of Agriculture.

As wholesale fertilizer prices have dropped, some retailers have been reluctant to lower their prices. Many of them stocked up on fertilizer when prices were high and forecasted to go even higher. When wholesale prices began to decline, retailers were left with a surplus of expensive fertilizer. Now, they must decide whether to maintain their previous prices, lower them or buy less expensive fertilizer to average into the cost of their more expensive inventory.

These factors are causing producers to see a wide range of prices as they shop for fertilizer for spring.

"In a normal year, the price Midwest producers pay for fertilizers generally varies no more than $75 per ton between retailers. This year, there's a $500 to $600 difference between retailers on certain products," said Greg Halich, UK agricultural economist.

While there is a big spread on fertilizer costs, all of the prices are lower than they were in July. Nitrogen has seen the biggest drop. It is half of what it was just six months ago. The price of phosphorus is down 30 to 40 percent from this summer and potassium is about 20 percent less, said Lloyd Murdock, UK soil scientist.

 In a small, informal survey, prices between Kentucky retailers varied as much as 20 percent on some products.

These decreases are causing producers to alter their 2009 plans for crop selection and fertilizer choices.

"Before, many producers were thinking about planting more soybeans than normal because it appeared corn would not be economical to grow," Murdock said. "Now that fertilizer costs have dropped, they'll probably stay with their normal corn/soybean crop rotation."

Some producers plan to apply more nitrogen based products, specifically urea, to their fields because this is the area where prices have dropped the most.

No one is sure how long prices will continue to drop. It is possible the demand for inputs will increase across the nation as it gets closer to planting time, which could drive up the costs, Halich said. In the last couple of months, the demand for fertilizer has been low. Many producers in the upper Midwest who normally fertilize in the fall held off this year due to wet soil

conditions and in hopes of prices dropping in the spring. Others that normally purchase fertilizer at the end of the year for tax purposes have not.

"The fear is that if too many producers wait until the last couple of months to buy fertilizer it could clog the distribution infrastructure, and they may not be able to get the fertilizer they need or will have to pay more for it than they would otherwise," he said.

News Topics: