What is in this article?:
- Match Input Purchases with Crop Sales | Cover All of Your Risks
- Consult your supplier
- Fuel up early
- Fertilizer follows corn
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.”
Fertilizer follows corn
Since 2006-2007, fertilizer prices have nearly mirrored corn prices, meaning profit margins require more than just hedging corn or soybeans sales at an attractive price.
“In the past, if you wanted to lock in a margin, you just worried about the price of corn,” says Scott Irwin, U of Illinois Extension economist. “Now, you have to be concerned with timing on inputs and output. Corn might go to $8, but if N goes to $1200, it eats your profit.”
Adam Dryer, consultant for Blue Reef Agri-Marketing, Morton, Ill., an introducing broker for FC Stone, says FC Stone graphs (see graphs) show how prices for UANand anhydrous ammonia have tracked corn regularly in recent years.
“Growers can use this knowledge to help determine when to lock in their inputs as well as corn prices,” Dryer says.