What is in this article?:
When locking in fertilizer prices, too many farmers don’t also lock in corn prices, even though fertilizer prices have consistently followed corn prices up and down. Lance Unger, Carlisle, Ind., takes a different approach. “It’s the only true hedge in the market,” he says.
Along with fertilizer, the Ungers lock in diesel early. “Welocked in diesel (in the spring), at about $3.20/gal., compared to about $3.80 orhigher later on,” he says. “That was through our co-op.
“We’re not fool proof,” he says. “We can lose money. It can be hard to haul $6 corn to the elevator when the price is $8. Also, with these high prices, some guys get short-sighted. They sit around and think grain prices are going higher. But they also paid high prices for fertilizer. If grain prices go down, they’re in trouble.”
Consult your supplier
Alan Miller, Purdue University economist and farm business management specialist, recommends working with your input retailer or elevator.
Unger and family consults with their local co-op, Ceres Solutions, as well as a regional ag marketing service, Blue Reef Agri-Marketing, Morton, Ill. For 2012, the Ungers made early corn sales at $6-$7 before the end of 2011 on about half of their crop. “We also locked in our basis at about 30¢-over through July.
“Shortly afterward we also locked in our anhydrous ammonia in the $800/ton range. That price was up to 10% below what it was a few months later. We saved close to $75/ton.” That’s about $7-$10/acre in savings for applying 180-200 units of N/acre preplant to produce a more than 200-bu. corn yield on irrigated land.
Early 2013 action included making corn sales and securing fall fertilizer needs in mid-summer. “We sold some $6.40 hedge-to-arrives (HTAs) for September (2013) delivery and some $6.50 HTAs for delivery the following March (2014),” Unger says.
That was on 25-30% of their projected 2013 production. “At the same time, we locked in about 30% of our fall fertilizer needs,” Unger says. “DAP was at about $600/ton.”
Those transactions were through their co-op elevator, with advice from their marketing consultant. Unger says they will also lock in ammonia needs early next year and make further sales at the same time.
“You may not think about one end when you’re conducting business on the other. Getting the timing worked out may not be easy.”