Released December 10, 2008
COLLEGE STATION, Texas – As the stock market fell so did commodity prices.
But nitrogen fertilizer prices didn't immediately follow suit, leaving agricultural producers pinched between low prices for crops and cattle and high production costs, said Texas AgriLife Extension Service personnel.
Fertilizer prices have started to drop, but many Texas producers are still worried about fertilizer costs for winter pastures and for upcoming spring plantings, AgriLife Extension agents reported.
"Concern remains over the high cost of fertilizer," said John Ford, AgriLife Extension agent in Kleberg County, south of Corpus Christi. "Field work for the 2009 crop season has slowed."
"Producers that planted winter pastures, they are in need of fertilizer," said Clint Perkins, AgriLife Extension agent in Wood County in East Texas.
"Hay feeding and protein supplementation is in progress in herds with nursing calves," said Jeff Stapper, AgriLife Extension agent in Nueces County, Corpus Christi. "Few annual winter pastures were planted due to lack of soil moisture and high cost of fertilizer. ... The only land preparation and fertilizer applications occurring are in fields that have acceptable moisture for seeding spring wheat varieties."
"Corn growers are preparing fields and putting out anhydrous ammonia fertilizer," said Dirk Aaron, AgriLife Extension agent in Bell County, southwest of Waco. "The cost has come down but conditions are not ideal for placement of this product." But fertilizer prices are now dropping and should drop more by spring planting, said Jerry Hand, sales representative with El Dorado Chemical Company, a manufacturer of industrial and agricultural grade ammonium nitrate. The price of natural gas composes most of the cost of manufacturing all nitrogen fertilizers, Hand said.
So as natural gas price drops followed those of gasoline and diesel, why didn't anhydrous and ammonia nitrate fertilizer costs immediately follow suit?
The answer is in part due to expensive inventory held by wholesalers, Hand said. Many suppliers bought inventories when natural gas prices were historically high in mid-July, which meant historically high manufacturing prices for nitrogen fertilizer as well, he said.
But high costs reduced demand by producers. Wholesalers held on for a while, reluctant to take big losses on their expensive inventories, Hand said.
Now it's a classic case of supply and demand that is driving prices down, he said. Producers should expect prices to drop further, but exactly how much is anyone's guess.
"Nothing is standard in the fertilizer business," said Hand, who is based in Tyler. "What happens in East Texas may be not be the rule for the rest of the state. It's an international commodity."
Hand noted that producers also should soon see lower costs for phosphate, but "very little relief" on potash prices.
"Potash prices are controlled by a few large producers, mostly in Canada," he said.
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http://agnews.tamu.edu/showstory.php?id=877
Contact: Robert Burns, 903-834-6191, rd-burns@tamu.edu
