After hitting record highs this spring, fertilizer prices are starting to cool. Its a function of lower demand and falling commodity prices. However, the big question is whether or not prices will continue to fall and if its time for farmers to be locking in some of these prices for the 2023 season?
Compared to March, urea prices in the New Orleans, Louisiana (NOLA) market topped out at $935 per ton and are currently in the lower $500 range. Phosphate is down from $1000 to between $750 to $800, while potash has dropped $150 to $200 from its highs. So, will the trend continue? One fertilizer expert says its hard predict.
Josh Linville, Stone X Financial Vice President of Fertilizer, says, “The problem is for each one of the major ones, Nitrogen, Phosphate, Potash, there are major global factors at play that even it was fundamental it would be hard enough to call on its own, but a lot of these factors are government driven or their product outside of the fertilizer world.”
He says the 2022 fertilizer market is also setting up similar to 2008 when prices fell in conjunction with corn prices as shown on this graph. “And of course as we remember the prices went up and then gradually started to drop off and this year it is extremely close, it is eerily close,” he adds.
So the big question is should farmers lock in some of these fertilizer prices and do you lock in grain prices at the same time? Linville says they’re advising hitting singles, not home runs. “We need to be looking for opportunities where we can lock in our inputs, whether that be fertilizer, whether that be chemical or whether that be seed, and sell some grain against it. If that relationship we look at it and say yes, I can be profitable at these type of numbers then its worth putting in a layer,” he says.
Fertilizer prices still ride on the war and whether Russia will be able to supply natural gas to Europe for nitrogen production and if Lithuania allows Belarus to export potash. Plus, China is resuming phosphate exports, but the time frame is still unknown. Linville says the other wild card is if the world is moving into recession that can also lower demand for grains and fertilizer, which could also pull fertilizer prices down.
He adds the ITC ruling striking down tariffs on UAN imports from Russia and Trinidad and Tabago will also help.
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