Nitrogen outlook, spring 2014Feb 7, 2014
Remember the childhood game of limbo, where you bend over backwards to fit beneath an ever-lower pole? That’s what nitrogen prices are doing to chase falling corn and natural-gas prices.
Nitrogen-price decreases as large as what we see now have only been larger in three years, according to Gary Schnitkey, the Illinois Farm Management Extension economist known for tracking these things: Since 1975, anhydrous-ammonia prices have decreased more in only three years: 1976 (-33%), 2002 (-38%), and 2010 (-34%).
But, the price drops still aren’t enough to fully offset projected 2014 profit drops (http://bit.ly/fert_Prices). Corn prices are forecast to fall 38% in 2014 from 2013, and corn fertilizer costs are likely to decrease by 19% to 27%. Put another way, corn fertilizer costs will decrease “by $60 per acre while crop revenue for corn may be down by more than $300 per acre,” Schnitkey says.
Reasons for this include lower natural gas prices (from the large Pennsylvania Marcellus Shale formation’s increased production), and more N-manufacturing capacity coming online.
Natural gas represents 80% of ammonia’s production costs, says Don Hofstrand, Iowa Extension value-added specialist, retired. “Anhydrous ammonia is 82% N and 18% hydrogen. The nitrogen (N2) in ammonia (NH3) comes from the air, and the hydrogen (H) comes from natural gas, as does the large amount of energy required to combine N2 gas and H.”