36
Farm News First >
BetterFarming.comBetter Farming
October 2016
MMBtu (one million British Thermal Units) in 2016 and
$2.95/MMBtu in 2017. Lower crude oil prices in 2015 and
2016 have led to a global glut of fertilizers, which has made
them more affordable. Future price direction could depend
on the U.S. crop, and the market does not seem too opti-
mistic about grain prices going forward. U.S. farmers are
looking to harvest huge (record large) crops in the 2016-17
growing season. With resultant tight crop margins expect-
ed, some corn farmers could tighten their input spending
and cut back some on applying fertilizer. But some may feel
that it is even more important to make good yields, now
that grain prices are low, and maintain their fertilizer
application levels.
Nitrogen fertilizer is a major input in corn production,
and the two are highly positively correlated. Better-than-ex-
pected soybean prices could prompt U.S. farmers to switch
to more soybeans and less corn. Soybeans do not use
nitrogen fertilizer and have been more profitable than corn
in recent years. Moving acres out of corn will reduce
demand for nitrogen fertilizers. Less demand in turn will
exert downward pressure on fertilizer prices.
Factors that could push fertilizer prices higher include:
■
Global currencies strengthening as the U.S. dollar
weakens (making fertilizer imports cheaper);
■
The slowdown in Chinese urea exports due to strong
domestic demand (demand for the product in China has
led to higher domestic prices than export prices);
■
Solid demand out of Brazil; and
■
A lucrative Indian subsidy for fertilizer purchases and
strong Indian demand due to forecasts for a return to
normal monsoon rains.
With U.S. retail fertilizer moving lower in recent months,
fertilizer prices are significantly lower compared to a year
earlier. Anhydrous ammonia is down by 25 per cent; MAP
and DAP are down by 22 to 23 per cent; potash is down 37
per cent; liquid nitrogen is down 27 per cent; and urea takes
the biggest drop at 31 per cent.
In 2017, as seasonality kicks in, nitrogen fertilizer prices
are expected to drop after the spring season. Though grain
prices have eased off recently, current fertilizer prices make
crop nutrients more affordable today than they have been
during the last five years.
An expected rise in crude oil prices could tighten supply,
but lower grain prices should keep demand steady to low.
This could lead to 2017 fertilizer prices remaining range
bound and trading at the lower end of the 2016 range.
Farmers could simply buy as their need dictates for the
remainder of 2016 and/or 2017.
BF
Maurizio "Moe" Agostino is chief commodity strategist with
Farms.comRisk Management.
Abhinesh Gopal is a commodity research analyst with
Farms.comRisk Management.
Risk Management is a member of the
Farms.comgroup of companies.
Visit
RiskManagement.Farms.comfor more information.
MOE’S
MARKET
MINUTE
Doug’s Small Engines Castleton 905-349-3027 Feenstra Equipment Ltd Athens 613-924-2805 Gateview Equipment Ltd Kingston 613-544-6363 Halnor Farm Equipment Waterford 519-443-8622 Ken Brownlee & Sons Earlton 705-563-2212 Beards Farm Supply Coldwater 705-325-3133 Blue West Equipment Courtland 519-688-0909 Bromley Farm Supply Ltd Douglas 613-649-2457 Coleman Equipment Inc New Dundee 519-696-2213 DeGagne Enterprises Inc Kenora 807-468-5540 It ’s your land. We’ll help you rule i variety of transmission options. One into battle, and keep you in power f © 2016 KIOTI Tractor Company a Division of Daedong-USA,Inc. 4Year Powertrain Warranty