Recent fertilizer price trends are not a pretty picture

Recent fertilizer price trends are not a pretty picture

?

$ per ton of material *

2001 2002 2003 2004 2005

Anhydrous ammonia 399 250 373 379 416Nitrogen solutions 189 127 161 178 215Urea 280 191 261 276 332Ammonium Nitrate 260 195 243 263 292Ammonium Sulfate 192 187 195 205 244Diammonium phosphate 244 227 250 276 303Concentrated superphosphate 236 221 243 266 299Potassium chloride 170 164 165 181 245

The good old days…

Why have fertilizer prices gone up so much ??

1)Fertilizer is a world commodity and global demand for nitrogen, phosphate, and potash increased 14, 13, and 19 % respectively from 2001 to 2006 (mostly increased demand from China, India, and Brazil). U.S. corn acres increased from 78.3 million in 2006 to 93.6 million in 2007 largely because of ethanol production. More corn acres = more fertilizer

2) Fertilizer industry infrastructure was not prepared for this surge in demand

3) All transportation costs have increased.

4)A weak U.S. dollar increased the cost of all imported goods. The U.S. imports ~ 60% of its nitrogen and over 90% of its potash.

5)High natural gas prices have driven up the cost of producing ammonia, which results in higher prices for all nitrogen and ammoniated phosphate fertilizer materials.

6) Major fertilizer companies have posted record profits.

The global potash market became very tight in 2007, due to stronger than anticipated demand for potassium fertilizers and logistical constraints in a few exporting countries.

> 80 per cent of mined K is exported !

Importers’ potash stocks were at very low levels. Most producers operated at close to capacity.

Total global potash production in 2007 was 55.4 Mt MOP eq., increasing by 14 per cent over 2006.

Potash exports in 2007 totaled 45.2 Mt MOP eq., representing an 18 per cent increase over 2006.

Phosphate ore reserves have been identified in 32 countries worldwide, but economic extraction is more limited.

The top three producing countries account for 63 % of world P production while the top 12 account for 93%.

The US exports ~ 60 percent of its annual phosphate production.

P fertilizer production is also geographically concentrated

Nitrogen fertilizer is currently produced in over 80 countries worldwide. Only 25% is traded

internationally

How is this possible?

All countries have access to N2, the dominant gas in the earth’s atmosphere.

Energy is the limiting factor.

Top five fertilizer consumersChinaIndia

United StatesBrazil

Pakistan

Top five fertilizer producersChina

United StatesRussiaCanada

India

Top five fertilizer importers

United StatesChinaBrazilIndia

France

Top five fertilizer exporters

RussiaCanada

United StatesBelarus

Germany

China’s high export tax on fertilizers, which ranges from 100 to 135 percent, is designed to keep

fertilizer in the country for domestic use

More than one-half of the fertilizer used in China is used to grow fruits and vegetables

•Top five fertilizer-consuming states: Illinois, Iowa, Ohio, Texas, Indiana.

•The fertilizer manufacturing industry is responsible for approximately 33,000 jobs in the United States.

•Fertilizer production facilities are located in 34 states.

•The U.S. nitrogen fertilizer industry operates production plants in 27 states, the phosphate fertilizer industry operates production plants in 12 states and potash is mined in Michigan, New Mexico and Utah.

US fertilizer production and consumption

~ 80 % of the cost of producing NH3

New Fertilizer Rules October 2008 Farm Journal

In this article Ken Ferrie suggests that the “real cost” of fertilizer can be easily understood by calculating the replacement cost of the N, P and K in harvested crops and then expressing this cost in terms of bushels of yield.

For example, 5 years ago, when the price of corn was ~ $2/bushel the cost of replacing the nutrients in 180 bushels of corn was ~ $50.

Calculating fertilizer cost

$50/acre / $2/bushel = 25 bushels/acre This ratio held relatively constant for over a decade - whether corn sold for $2.38 a bushel or $4.75.

12 anhydrous terminals in Illinois

Most are supplied by barge or pipeline

Only one terminal is supplied by rail

The pipeline is currently at capacity

Terminals were built in the late 60s and early 70s.

Rail carriers have petitioned for indemnification

Retailers have expressed interest in receiving NH3 directly by rail

Fall applications are necessary

Main concepts in the article

Ammonia pipelines in the US

The pipelines are 8-10 inch diameter, constructed of plain carbon steel, with a total length of approximately 3000 miles.

State Fertilizer N Grain N Excess N

Illinois 768.6 569.1 199.5 (35)

Iowa 671.7 641.8 29.9 (5)

Nebraska 527.4 418.6 108.8 (26)

Indiana 377.2 285.0 92.2 (32)

Minnesota 346.5 337.0 9.5 (3)

Ohio 246.0 161.2 84.8 (53)

Kansas 198.9 140.8 58.1 (41)

Missouri 178.2 112.2 66.0 (59)

South Dakota 146.1 134.7 11.4 (8)

Michigan 120.9 90.1 30.8 (34)

Kentucky 92.1 51.4 40.7 (79)

Relationship between annual N fertilization and N removal in corn grain for 12 states in the USA Corn Belt (1994-2001 averages).

Fertilizer labels

• Minimum guaranteed amounts of available N, P2O5 and K2O in fertilizer

5 – 10 – 30

N – P2O5 – K2O

Calculated on a % of total weight basis

Illinois law regulates fertilizer analysis, labeling and documentation of sales.

http://www.agr.state.il.us/Laws/Regs/fertilizer.pdf

An element is considered "available" if the form in which it

is added to the product has been shown to give plant

responses or if the element can be dissolved from the product in water or in some other solvent which is recognized to indicate

availability to plants.

Somewhat flexible interpretation of availability

When claims for such nutrients are made on the label, container, or application for registration, the minimum percentages which will be accepted

for registration are as follows:

ELEMENT %Calcium (Ca) 1.00

Magnesium (Mg) 0.50Sulfur (S) 1.00Boron (B) 0.02

Chlorine (Cl) 0.10Cobalt (Co) 0.0005Copper (Cu) 0.05

Iron (Fe) 0.10Manganese (Mn) 0.05

Molybdenum (Mo) 0.0005Sodium (Na) 0.10

Zinc (Zn) 0.05

Elements which are guaranteed shall appear in the order listed, immediately following the guaranteed analysis for the primary nutrients,

nitrogen, phosphorus and potassium.

1.00-3.00-4.00-Ca17.00--Mg0.40-S3.00--B0.01-Cu0.05-Fe

Warning or caution statements are required on the label for any product

which contains 0.03% or more of boron in a water-soluble form or 0.001% or more of

molybdenum.

When 0.001% or more of molybdenum is added to an agricultural fertilizer, the

purchaser is to receive a caution statement as follows: "CAUTION: This fertilizer is to be used only on soils which respond to

molybdenum. Crops high in molybdenum are toxic to ruminants."

http://www.agr.state.il.us/programs/fert2/reports/Spring2007LabTotals.pdf

Fertilizer products are regularly tested in IL

Excerpt from a recent speech on fertilizer quality control

Fertilizer sales in IL are well documented

178,125 1,679,670 2,039,496 168,215 16,564 3,897,293 1,043,307 342,187 569,491

58% 44% 44%

Fertilizer sales in IL (fall 2006/spring 07)

42% 56% 56%

Seasonal totals

July – December 2006

January – June 2007

N P2O5 K2O

Majority in the fall

Majority in the spring

Material fall06 spring070-0-60 207,410 143,0410-0-62 92,880 86,821

Material fall06 spring070-46-0 2605 98011-52-0 32,880 18,98910-34-0* 2355 5,32818-46-0 144,779 107,710

99.1 % of material grade94% of total

98.6 % of material grade93.6% of total

K2O and P2O5 fertilizer sales in IL

* (10-30-0, 10-32-0, 10-34-0, 11-33-0, 11-37-0)

342,187 tons

569,491 tons

DAP

MAP

MOP

73.8%

15.2%

K2O

P2O5

Material fall06 spring0711-52-0 6,955 4,01718-46-0 56,653 42,14710-34-0* 766 1,56728-0-0 19,173 127,44732-0-0 12,616 75,73746-0-0 10,136 23,48082-0-0 293,375 277,95282.5-0-0 17,906 4830

98.8 % of material grade 94.6% of total N

N fertilizer materials (tons)

* (10-30-0, 10-32-0, 10-34-0, 11-33-0, 11-37-0)

1,043,307

55 %

22.5%

10.5%

AA

Urea

UAN

DAP

3.2%

MAP

Shift toward greater use of urea and UAN

Terra presentation

Terra presentation

Joel,

This looks to me like a lousy idea being promoted by individuals with vested interests in the ammonia industry. Ammonia is highly toxic, difficult to handle and has a very negative energy balance. As Bob said, using the H directly would be more efficient, but using the wind power electricity directly to charge electric vehicles or hybrids would be more efficient still. Of course, using natural gas directly to power vehicles would be much more efficient that first using it to make NH3. I didn't see anywhere on the website or links that the net energy balance of using NH3 was calculated…

New controlled-release nitrogen fertilizers are being developed while other fertilizers are already waiting to take market share once the environmental and economic situation dictates growers switch from conventional fertilizer products.

Companies continue to search for alternatives to the big four nitrogen fertilizers---anhydrous ammonia, solid urea, ammonium nitrate and liquid UAN.

For the first time, company research is focusing on three fronts simultaneously--environmental impact, yield response and overall economics. "A lot of the work done in the past has only been done looking at one or two of those components, but in today's world they need to look at all three," says Jim Porterfield, special projects research director with the economic analysis team of the American Farm Bureau Federation.

A basic contention is that farmers need new fertilizers that provide a better match between crop growth curves and nutrient availability. Additionally, farmers in the future will need new products to meet stricter Environmental Protection Agency regulations controlling water quality, limiting nitrogen run-off and leaching and air emissions of nitrous oxide and ammonia.

There is recognition that farmers will not have the option of ammonium nitrate much longer because of all the restrictions and security measures placed on its manufacture, transport, storage and sale. Anhydrous ammonia could go by the wayside quickly, too, with the right replacement product. Hidden costs and safety concerns are always in the back of retailers and farmers' minds about NH3, but at the moment, knifing in NH3 is a low-cost option for minimum-tillage situations. Because urea and UAN are not stable for surface application, no-tillers and most growers are open to looking at replacement products that don't readily volatilize.

Most corn acres in IL receive N, P and K

Most soybean acres in IL do not receive fertilizer

Nitrogen 12.04 13.19 + 9.6 Phosphate 4.48 4.57 + 2.1 Potash 4.72 5.13 + 8.7

F05/S06 F06/S07

Millions of tons applied in US

Why??

Where fall tillage is practiced, P and K are normally broadcast before tillage; where tillage is in the spring, fertilizer application is often in

late winter or early spring.

In many areas, particularly where corn is sown in cool soil or where inherent fertility is low,

some of the P and K is applied at sowing as a band application below and to the side of the

seed.

Irrigated corn

In center pivot systems, IL farmers often apply 60 % of the total N pre-

plant and the remainder in successive applications of ~ 20 lbs/acre through

the center pivot.

The last N application normally occurs around anthesis or a few weeks after.

Fertilizer Types

• Straight Fertilizer – contains only one of the three major nutrients (e.g., 46-0-0)

• Mixed Fertilizer – contains more than one of the three major nutrients (e.g., 18-46-0)

• Complete Fertilizer – contains all three of the major nutrients (e.g., 6-24-24)

Physical forms of fertilizer

Solid powder, granular, prill(Normally treated to maximize flowability and minimize dust)

bulk vs. bagged (>> 90 % bulk)

Fluid/liquid

~ 40% of nutrients> 50% of all single nutrient carriers in US

Prills are formed by allowing drops of the prill substance to congeal in mid-air by being dripped from the top of a

prilling tower.

Ammonium nitrate, urea and many complete fertilizers are sold as prills

Solid materials can be blended but serious problems can occur such as segregation, chemical reactions and clumping from moisture in the air

Micronutrients can be blended with macronutrient

fertilizers

Segregation is likely to occur if granules are not all the same size

Micronutrient fertilizers have come a long way !

Methods/locations of application

Broadcast on surfaceBroadcast w/incorporation

Band at plantingDeep injectionPoint injection

Dribble on bandingFoliar

Why use starter fertilizer ?

• Precision placement– Higher nutrient use

efficiency– Avoid skips and

overlapping

• Limits fixation of P and K by the soil

• Soils slow to warm in the spring

• Environmental benefits

www.soils.wisc.edu/extension/teachingmaterials/Wolkowski/RowPlacedFertilizer2004.ppt

Historically Starter “Was a Good Thing”

• Lower soil test levels

• Smaller planters

• Limited corn acreage per farm

• Lower availability of custom application

• Response often linked to P


Early season growth response is not a guarantee of economic benefit

• Starter fertilizers stimulate early plant growth and development

• Early season growth response is not always a predictor of yield response

• Yield response potential lower on high testing soils

• Grain moisture reductions sometimes observed with starter when there is no yield response

No-till corn planted with (left side) and without (right side) starter fertilizer – total application = 40 lbs N, 42 lbs P2O5 and 33 lbs K2O per acre

http://www.ontariocorn.org/magazine/Issues/2006/03%20March/F1-0306.html


Starter fertilizer use has changed

• Loss of time-use efficiency at planting

• Practicality of mounting and carrying attachments and fertilizer on very large planters

• Cost of attachments• Lower potential for

response on high testing soils

John Deere Website


Economics of starter fertilizer attachments in IL

Attachments on8-row Planter

TotalPlanterList Price

FieldCapacity

$ ac/hr

No attachments 26,400 9.3

2 x 2-bandedfertilizerattachments

34,700 8.0

Starter attachments increased planter price 31 % and slowed planting 14 %

Cost of starter attachments decreases with time and use (500 acres per year)

Avg. cost of 8-row planter with starter

since purchase

Years afterpurchase

Seed-placed

2 x 2

------------ $/ac ----------

2 2.05 4.10

4 1.35 2.70

6 1.10 2.20

8 1.00 2.00

10 0.90 1.80

Hibbard et al., 1996Hibbard et al., 1996


Many factors affect the probability of response to starter fertilizer

• Soil test P and K

• pH

• Organic matter

• Manure use

• Soil texture

• Hybrid maturity

• Planting date

• Previous crop

• Soil type

• Latitude

• Fertilizer grade

• Soil yield potential

• Weather

• Placement

• Tillage


Conservation tillage systems are more responsive to starter fertilizer

• Positional availability– Lack of mixing by tillage– Immobilization

• Wheel track vs. non-wheel track effects on root distribution

• Cooler soil conditions

• Reduced K uptake from zones of poor aeration


Yield response to starter fertilizer in selected no-till corn experiments

LocationLocation

TreatmentTreatment

ResponseResponse

MissouriMissouri

Scharf (1999)Scharf (1999)

N,P,K; 2 x 2N,P,K; 2 x 2 6 of 6 expts.6 of 6 expts.

13 bu/a incr.13 bu/a incr.

IowaIowa

Buha et al. (1999)Buha et al. (1999)


4-18 bu/a incr.4-18 bu/a incr.

WisconsinWisconsin

Bundy - Widen (1999)Bundy - Widen (1999)



IllinoisIllinois

Ritchie et al. (1996)Ritchie et al. (1996)




Regional trend for more conservation tillage

• Eight Midwestern states:– 106 million acres of cropland– 37 percent of all U.S. cropland

• 46% of no-till acres in U.S. in the Midwest • 2002 Midwest data

– 17 million acres of no-till soybeans – 7 million acres of no-till corn – Forty-five million acres (42.5 %) used

conservation tillage

CTIC Website (2002 data)


What about seed-placement ?What about seed-placement ?

Some suggest higher availability Some suggest higher availability for seed-placed materialsfor seed-placed materials

Difficult to include KDifficult to include K

Avoid high salt carriers and Avoid high salt carriers and use on salt-sensitive cropsuse on salt-sensitive crops

No urea, UAN, ATSNo urea, UAN, ATS

Limit to 10 lb N + KLimit to 10 lb N + K22O/aO/a

Use with caution on sandy or dry soilsUse with caution on sandy or dry soilswww.soils.wisc.edu/extension/teachingmaterials/Wolkowski/RowPlacedFertilizer2004.ppt

Soil test K, ppm50 100 150 200 250

Yie

ld r

es

po

ns

e,

bu

/ac

re

-40

-20

0

20

40

60

80

100

VL L O H EH(47) (19) (-2) (8) (1)

QRPy=343-6.82x+0.034x2

if x<100y=0 if x>100

R2=0.52 n=54

Relationship Between Soil Test K Level and YieldRelationship Between Soil Test K Level and Yield

Response to Starter Fertilizer at Arlington, 1995Response to Starter Fertilizer at Arlington, 1995


Critical soil test K level, ppm

100 110 120 130

Cu

mu

lati

ve

GD

D

2000

2100

2200

2300

2400

2500

Air

te

mp

era

ture

de

pa

rtu

re ,oF

-2

-1

0

1y = 1119 - 0.84x + 0.00017x2

R2 = 0.97

19961993

1994

1995

Relationship between temperature and maximum soil test K Relationship between temperature and maximum soil test K level where yield response occurredlevel where yield response occurred to starter fertilizerto starter fertilizer


Poorly Developed Root Systems Cannot Poorly Developed Root Systems Cannot Explore the Entire Soil Volume (Which Explore the Entire Soil Volume (Which

Side Received Starter?)Side Received Starter?)


Compaction affects nutrient uptake !

Potassium Affected Most• Compaction reduces porosity

and

limits root growth

• Lowers soil O2 and slower

replenishment from the atmosphere

• O2 needed for root respiration and active uptake of K

• Compacted soils are often

responsive to K fertilizationwww.soils.wisc.edu/extension/teachingmaterials/Wolkowski/RowPlacedFertilizer2004.ppt

Row K Effects on Corn Yield with Increasing Soil Compaction

Initial K Soil test = 102 ppm


Summary of starter fertilizer concepts

Research indicates that it is worth the time and expense in many situations

• N or N-P starters may not maximize response – Complete (NPK) starters give a more consistent

response

• Research shows K in starter is important

– Reduced tillage

– Low K soils

– Compacted soils


• Frequency and size of response to starter is

influenced by GDD accumulation

– Response to starter occurred at higher soil test K

levels in cooler growing seasons

• Recommendations

- Use a complete starter

- Use fluids containing K

- If using seed placement, avoid materials and

rates that are likely to harm seeds/seedlingswww.soils.wisc.edu/extension/teachingmaterials/Wolkowski/RowPlacedFertilizer2004.ppt

Summary continued

Are you familiar with the Illinois Fertilizer and Chemical Association ?

http://www.ilfb.org/uploads/adhoc/Payne_Workshop_b1.pdf

Allocate fertilizer to most responsive areas.More responsive areas are not very sensitive to price fluctuations.

Examples of areas that are very likely to be responsive:

• areas with low P and K soil test levels• areas that are coarser textured and/or have low organic matter contents• areas where corn will not follow a legume crop/cover crop

Because the yield response is normally large at low soil test levels, the short-term economically optimum rate

(EOR) does not change much as prices vary.

Smaller yield responses when soil test levels are medium result in greater variation in EOR in response to fluctuating prices. When the nutrient price is higher relative to the crop price, only lower rates are justified. However, when nutrient price is lower relative to the crop price, higher rates are needed.

EOR ~ 0 when soil test levels are high

When fertilizer is scare or expensive, allocate fertilizer to most responsive areas!

More responsive areas are not very sensitive to price fluctuations.

Examples of areas that are very likely to be responsive:

• areas with low P and K soil test levels• areas that are coarser textured and/or have low organic matter contents• areas where corn will not follow a legume crop/cover crop

Apply some fertilizer to less responsive areas as well!

Most of the crop response occurs with the first fewunits of added nutrient. Reductions are economicallyjustified when nutrient prices are more expensive relative to crop prices.

Examples of areas that are less likely to be responsive:

• areas with medium P and K soil test levels• finer-textured soils and/or areas with higher OM content• where corn is following a legume crop or cover crop

Various combinations of 2 nutrients can produce the same yield (one curve) or different yields (moving from one curve to another).

When more than one nutrient is limiting, additions of the nutrients can interact to produce greater crop response than any particular nutrient applied alone.

University recommendations are generally based upon experiments that change the level of only one nutrient, while keeping all other nutrient levels high

Because there are several combinations of both nutrients that can produce the same yield, there is some flexibility in how we combine the nutrients to attain a given yield, based upon nutrient price

Try to apply at least some of all nutrients that are in short supply in the soil to take advantage of positive interactive effects

If only a low rate of a needed nutrient can be afforded, consider banding it and placing it strategically.

Roots should be able to intercept it early in their development, but the nutrient should be placed far enough from the seed to minimize any possibilities of damage. If a higher nutrient rate can be afforded, considerbanding part of it strategically and broadcasting and incorporating the rest to fertilize a greater soil volume

Documents

Recent fertilizer price trends are not a pretty picture