Expect Drop in Fertilizer Costs
Lower fertilizer prices in 2009 may lead to an increase in corn profitability relative to soybean profitability, according to University of Illinois Extension farm financial management specialist Gary Schnitkey.
“Difficulties within the financial sector became apparent last fall. The financial meltdown, along with public perceptions of economic problems, has led to concerns that a deep, world-wide recession is occurring. As a result, prices of many commodities have declined dramatically in the belief that demands for those commodities are being reduced. Among those commodities seeing declines are wholesale fertilizer prices.”
See Schnitkey’s report, “Fertilizer Prices Likely to Decline in 2009,” on the U of I Extension’s farmdoc website.
As of yet, prices farmers pay for fertilizers have not decreased as much as declines in wholesale prices. Non-declining prices are attributed to large unsold fertilizer inventories held by many retailers. Retailers will lose money on those inventories if they follow wholesale prices down.
“While retailers will suffer financial losses, there are incentives for farmers to delay purchasing fertilizers, waiting for fertilizer prices to decline. Waiting to purchase fertilizer poses some risks to farmers.”
Among these, is the possibility supplies become limited if suppliers curtail production. Geopolitical events may also impact prices.
Source: University of Illinois College of Agricultural, Consumer and Environmental Sciences.
