Record-high natural gas prices continue to weigh heavily on the U.S. economy, and the situation is just as unsettling for nitrogen fertilizer manufacturers and grain producers.
The reason is simple. Natural gas is the chief ingredient in manufacturing nitrogen fertilizer products. Tight supplies and high prices for natural gas mean the same for nitrogen (N).
“In early summer, stored supplies of natural gas were about 30% below the average for the last five years,” says Robert Hoeft, professor of soil fertility at the University of Illinois-Champaign. “Consequently, natural gas prices at this time were already $6 or higher, compared to $3.65 a year ago.”
Producing a ton of ammonia requires slightly more than 30,000 million Btus of natural gas, according to Hoeft. So, for each $3 increase in natural gas prices, the cost of ammonia production goes up by about $90-100/ton.
For the 2004 season, there will be price hikes across the board, since ammonia is the feedstock for other nitrogen products.
However, Hoeft says, foreign producers aren't experiencing such steep hikes in gas prices, so it's likely that more urea and urea ammonium nitrate (UAN) may be imported.
Continued tighter-than-normal supplies and higher prices also hinge on growing demand from households heated with natural gas and on power plants using gas instead of coal or other fuels to generate electricity.
The volatility in natural gas supplies and prices has concerned domestic fertilizer manufacturers. Many are often faced with hard choices in how natural gas supplies are used to make products other than anhydrous ammonia.
For example, rapid price increases may entice some anhydrous ammonia manufacturers to shut down plants or reduce capacity and simply sell natural gas for better margins, says Charles Shapiro, a University of Nebraska soils specialist. That condition curtailed overall supplies of anhydrous ammonia in some years.
This isn't a surprising strategy, according to Shapiro, since natural gas accounts for 70-80% of the cost of producing anhydrous ammonia.
Farmers who need anhydrous ammonia for next year's corn crop may see prices hit $450/ton (or 25¢/lb. of N) compared to $245/ton (or 15¢/lb.) just two years ago, says Shapiro. At an application rate of 150 lbs. N/acre, this price hike over the two-year period represents a production cost increase of $15/acre.
Scott Smith, agronomy manager at Landmark Services Cooperative, Evansville, WI, estimates that producers could see an increase of anywhere from $5 to $10 more per acre for N compared to last year's levels. “Buying some of your nitrogen now under a prepay arrangement would be a good way to at least lock in and help hedge against price swings or further price increases,” he says.
Under these circumstances, controlling N costs this coming growing season may become one of the most challenging and important management tasks on record for grain producers.
As is often the case, good crop management will help soften the squeeze on the pocketbook from higher N costs.
Here are some key items to consider:
Soil testing: Dollar for dollar, soil testing is perhaps the best investment you can make to manage fertilizer costs. Hoeft says maintaining good pH levels and well-balanced levels of major plant nutrients is very important, and a soil test can help determine if and where lime, phosphorus or potassium may be needed.
“Over the past few years, potassium deficiencies in corn have shown up more often than they should in Illinois,” says Hoeft. “High yields will remove large amounts of potassium, and it's an important nutrient to maintain good yields. All too often the deficiencies creep in when producers don't take those losses into account and then try compensating with extra nitrogen.”
One important strategy for growing corn when faced with a shortage of N is to use proven crop production practices, says Hoeft. “Nitrogen-use efficiency will be optimized when soil pH is maintained above 6.0, and P and K tests are maintained at optimum levels,” he says. “It's also essential to use proven techniques for controlling weeds, insects and diseases.”
In combination with soil testing, Hoeft also recommends using a basic formula available from the University of Illinois' Agronomy Handbook. Or use fertilizer tables available from other sources to determine N needs (see story at right).
Taking soil samples from smaller representative areas of fields, such as 2½-5 acres, is also becoming more important in managing crop nutrients, according to Smith. “This more precise soil sampling can help producers fine-tune and balance soil fertility,” he says. “By maintaining proper levels of pH, phosphorus and potash, you're also helping the crop utilize nitrogen more effectively and efficiently.”
Precision soil sampling will also play a more important role in developing nutrient management programs. “We're encouraging our customers to take soil samples from five-acre areas in fields so that they're more prepared with detailed and accurate information when applying for cost-sharing programs under state or federal nutrient management programs,” says Smith.
Take credit for nitrogen already present: “When making your fertilizer plans, it's especially important to take credit for any homegrown nitrogen,” says Hoeft. “Corn following a legume such as soybeans, clover or alfalfa, requires less nitrogen than corn following corn. On a field that receives a manure application, nitrogen fertilizer can be reduced by an amount equivalent to the N available from the manure.”
In addition, many producers apply their phosphorus as an ammoniated phosphate; they're using DAP or di-ammonium phosphate (18-46-0) or mono-ammonium phosphate (MAP). In these cases, Hoeft says to make sure that you account for the nitrogen in such products. “This is valuable nitrogen, and you should take credit for it,” he says.
Hoeft also says to recognize the nitrogen present in your herbicide solutions. A 10-gal. solution of 28% N equals about 30 lbs. N/acre, he says. Again, it's important to take credit for this amount.
Alternative sources of nitrogen: “One way of dealing with limited supplies is to allocate fertilizer across all corn acres,” says Hoeft. Besides acknowledging homegrown N, producers can also explore using alternative sources, such as livestock manure or sewage sludge.
According to Hoeft, growers may even consider changing crop rotation to soybeans in the unlikely event that no N is available or it's too costly. He also suggests planting a nematode-resistant variety if the presence of soybean cyst nematode is suspected.
Timing of application based on soil types: “Obviously, the best time to apply nitrogen is as close to the time the crop needs it,” says Hoeft. “This requires either a preplant or a sidedress application, but with 10 million acres of corn in Illinois, farmers and dealers can't handle all the material in that short time period.”
If you're considering fall application, Hoeft offers this advice:
Don't apply until soil temperatures are cool enough. Hoeft recommends waiting until soil temperatures reach below 60° if using a nitrification inhibitor and 50° if an inhibitor isn't used.
Apply the right rate. Hoeft says the best guide is to apply 1.2 lbs. N/bu. of proven yield. Then take credit for soybeans and other nitrogen that might be applied, such as manure, DAP, starter N, 28% N applied with herbicides, and so on. If prices are higher, you may want to lower the N rate slightly.
Consider using nitrification inhibitors to reduce the rate of conversion of ammonium to nitrate. These products tend to work better on well-drained fields. Avoid fall or early spring applications on habitually wet fields.
Products like Ammonium Thio-Sul (12-0-0-26) applied with 28% and N-Serve with NH3 (anhydrous ammonia) are fairly economical ways to help stabilize the nitrogen and inhibit nitrification, says Smith.
For more information on managing fertilizer, check out the following:
The 2003-2004 Agronomy Handbook: This comprehensive, 331-page manual from the University of Illinois contains a wide variety of agronomic and crop fertilizer information.
It's also available as a pdf file from an interactive Web site: www.ag.uiuc.edu/iah. Information on how to order can be found there.
Here, you'll also find interactive nitrogen worksheets to plug in your data to find suggested figures for applications (see Chapter 11, Soil Testing and Fertility).
Manure Characteristics, MWPS-18: This 24-page publication offers up-to-date information about all aspects of solid, semi-solid, slurry and liquid manure handling characteristics, as well as sampling and testing manure, nutrient content, and estimating manure nutrient content based on animal diets. Contact: Midwest Plan Service, 122 Davidson Hall, Iowa State University, Ames, IA 50011-3080, firstname.lastname@example.org, 800-562-3618 or 515-294-4337.
The Corn Stalk Nitrate Test: While the corn stalk nitrate test is an end-of-season task, it's still something to consider and plan for in the growing seasons ahead. It can provide a final review of your nitrogen program each year and help evaluate the efficiency of the application rates, says Nebraska soils specialist Charles Shapiro. For information on this test, visit www.ianr.unl.edu/pubs/fieldcrops/nf491.htm.