USDA is forecasting record fertilizer expenses in 2007.
Expenses are expected to rise 17 percent to $15.3 billion. The increase is attributed to the rising price of natural gas, more fertilizer being used and more demand for corn. USDA said fertilizer use should increase by 5 percent with use on corn up 9.5 percent.
Natural gas is the "building block" of nitrogen fertilizers, said Carl Rosen, University of Minnesota Extension soil scientist. It is an ingredient and part of the process to create anhydrous ammonia, which is used as nitrogen fertilizer or to make other forms of nitrogen fertilizer. Rosen also noted that most phosphorus fertilizers are combined with nitrogen.
The demand for fertilizer has jumped because more acres of corn were planted to meet ethanol demands.
It is an ironic twist, said Rosen, that nitrogen fertilizer is used to make corn for ethanol while it is the energy prices that are pushing up the price of fertilizer.
Bret Oelke, regional Extension educator in agricultural business management, said fertilizer costs grew since last fall to over $500 a ton when corn growers are used to paying in the $200 range. The price is the highest he can recall. Fertilizer companies charge more due to high demand and high-priced corn.
If fertilizer prices continue to rise, sales made of corn grown in 2008 that are profitable for the producer now could turn to sour deals.
"If you're putting on fall fertilizer, you're gonna want to be cautious to the overall cost of production and set your corn price accordingly," Oelke said.
Higher-priced fertilizer should make more producers think about their application methods. Rosen said farmers with irrigated fields should split their applications, one pre-plant and one when corn is knee-high. Producers with non-irrigated fields should watch weather conditions. It may be beneficial in a dry year to do one fertilizer application.
To help producers with these issues, the University of Minnesota offers agriculture business management marketing clubs.
"We spend probably as much time on management issues as we do on marketing," said Oelke.
A new five-part series, "Building a Winning Team: Management in Marketing for Farm Couples," is expected to begin late winter of 2008. Contact Oelke at [email protected] to learn more.
The Web site for Ag business management: http://www.extension.umn.edu/agbusinessmanagement/