Costs are calculated using prices representative of fertilizer prices in the late summer and early fall prior to the drop in wholesale fertilizer prices. Fall prices are a $1,000/ton for anhydrous ammonia, $1,000/ton for DAP and $900/ton for potash. Given these prices, fertilizer costs are $210/acre for corn and $92/acre for soybeans.

In anticipation of retail price declines, fertilizer costs are calculated at lower prices that may be prevalent in spring. Prices of $600/ton for anhydrous ammonia, $800/ton for DAP and $600/ton for potash are used in calculating costs. Given these "spring prices," fertilizer costs are $143/acre for corn and $64/acre for soybeans.

Spring prices result in significantly lower per acre fertilizer costs. For corn, fertilizer costs using spring prices are $67 lower than for fall prices ($210 cost using fall prices, $143 cost using spring prices). For soybeans, fertilizer costs using spring prices are $28 lower than fall prices ($92 costs using fall prices, $64 costs using spring prices). The $67 reduction in corn fertilizer costs is $39 larger than the $28 reduction in soybean costs. These fertilizer cost reductions increase the profitability of corn relative to soybeans by $39/acre – a sizable increase that may cause corn to be more profitable than soybeans.

Of the $67 decline in corn fertilizer costs, ammonia price declines accounted for $36 of the decrease. Stated in percentage terms, the $36 ammonia cost decrease was 56% of the total corn cost decrease. Since N fertilization is not needed for soybeans, prices changes in N sources such as anhydrous ammonia will have larger impacts on relative profit changes between corn and soybeans as compared to prices for phosphates and potash.

Summary