by DAN PILLER
Iowa farmers have seen this one before: Corn prices go up, and so do fertilizer prices.
But this time, fertilizer prices may stay high longer than normal. That will cut into farmers' profit margins and possibly discourage them from planting more corn acres when supplies of corn are the tightest since the mid-1990s.
In 2008 corn prices briefly reached above $7 per bushel. By early 2009, nitrogen prices, in the form of anhydrous ammonia, more than tripled to $900 per ton.
Last year things quieted down, with corn below $4 per bushel and nitrogen back in the $400- to $450-per-ton range.
Now corn is soaring again, at 30-month highs near $7 per bushel. Right on schedule, nitrogen has jumped to as much as $780 per ton.
"We see this every time corn prices go up," said Harry Ahrenholtz, executive vice president for agronomy for West Central Co-Op in Ralston, which sells fertilizer at its 24 elevator locations in central Iowa.
But this year's fertilizer price surge has a key difference, one that suggests that unlike 2008, the high prices won't fall back.
The 2008 prices were driven by record prices for natural gas, the key catalyst in turning oxygen into nitrogen.
This year natural gas has fallen back to about $4 per thousand cubic feet, less than half its price of mid-2008. Yet fertilizer prices are approaching their 2008-09 highs.
"Natural gas prices have less to do with the price of anhydrous now," Ahrenholtz said.
This time the upward pressure comes from the competition for fertilizer from farmers in China, India and South America.
"Demand is very heavy in international markets now," said Dave Coppess, executive vice president at Heartland Co-Op in West Des Moines, which sells fertilizer from 50 cooperatives between Guthrie and Iowa counties.
"Farmers are in a world market for fertilizer," he said. "It's a situation much like the market for oil; as agriculture expands in other countries demand rises all over."
Anhydrous ammonia, the most widely used fertilizer for corn, is up 57 percent in price from a year ago. Phosphorus is up 46 percent, urea up 17 percent and potash (also referred to as potassium) up 15 percent.
Higher fertilizer prices are a tipping point in the battle for acres between corn and soybeans.
Corn needs nitrogen, particularly if planted on the same ground two years consecutively.
Soybeans need some phosphorus and potash but don't require the 140 pounds of nitrogen per acre that corn needs.
Also, farmers have agronomists from the extension services and seed companies looking over their shoulders, and most experts frown on corn-on-corn repeat plantings.
"When you're getting near $14 per bushel for soybeans, farmers will think hard before they change their normal rotations," said Randy Hertz, owner of a Nevada-based farm management company.
"Most farmers do their corn and soybeans on a 50-50 rotation, and don't like to change," Hertz said.
For that reason most early surveys of farmers' intentions show that corn will gain about 2.5 million to 3 million acres above the 88 million acres planted nationally (12 million acres in Iowa). But commodity traders say corn needs an additional 5 million acres nationally to alleviate the tightest domestic supply situation since the mid-1990s.
The U.S. Department of Agriculture pegged supplies last week at less than half the 1.7 billion bushels of corn in reserve a year ago. Those tight supplies are the prime reason the price of corn has shot up from $3.50 per bushel last June to $6.50 per bushel this month.
Some analysts predict that corn prices will drive through the $7- to $8-per-bushel level if those 5 million more acres of corn plantings don't materialize by March 31, when the USDA reports on its survey of farmer planting intentions.
Ahrenholtz and Coppess said fertilizer sales have been strong but don't indicate a major shift in acres to corn in Iowa.
In 2008 corn prices briefly reached above $7 per bushel. By early 2009, nitrogen prices, in the form of anhydrous ammonia, more than tripled to $900 per ton.
Last year things quieted down, with corn below $4 per bushel and nitrogen back in the $400- to $450-per-ton range.
Now corn is soaring again, at 30-month highs near $7 per bushel. Right on schedule, nitrogen has jumped to as much as $780 per ton.
"We see this every time corn prices go up," said Harry Ahrenholtz, executive vice president for agronomy for West Central Co-Op in Ralston, which sells fertilizer at its 24 elevator locations in central Iowa.
But this year's fertilizer price surge has a key difference, one that suggests that unlike 2008, the high prices won't fall back.
The 2008 prices were driven by record prices for natural gas, the key catalyst in turning oxygen into nitrogen.
This year natural gas has fallen back to about $4 per thousand cubic feet, less than half its price of mid-2008. Yet fertilizer prices are approaching their 2008-09 highs.
"Natural gas prices have less to do with the price of anhydrous now," Ahrenholtz said.
This time the upward pressure comes from the competition for fertilizer from farmers in China, India and South America.
"Demand is very heavy in international markets now," said Dave Coppess, executive vice president at Heartland Co-Op in West Des Moines, which sells fertilizer from 50 cooperatives between Guthrie and Iowa counties.
"Farmers are in a world market for fertilizer," he said. "It's a situation much like the market for oil; as agriculture expands in other countries demand rises all over."
Anhydrous ammonia, the most widely used fertilizer for corn, is up 57 percent in price from a year ago. Phosphorus is up 46 percent, urea up 17 percent and potash (also referred to as potassium) up 15 percent.
Higher fertilizer prices are a tipping point in the battle for acres between corn and soybeans.
Corn needs nitrogen, particularly if planted on the same ground two years consecutively.
Soybeans need some phosphorus and potash but don't require the 140 pounds of nitrogen per acre that corn needs.
Also, farmers have agronomists from the extension services and seed companies looking over their shoulders, and most experts frown on corn-on-corn repeat plantings.
"When you're getting near $14 per bushel for soybeans, farmers will think hard before they change their normal rotations," said Randy Hertz, owner of a Nevada-based farm management company.
"Most farmers do their corn and soybeans on a 50-50 rotation, and don't like to change," Hertz said.
For that reason most early surveys of farmers' intentions show that corn will gain about 2.5 million to 3 million acres above the 88 million acres planted nationally (12 million acres in Iowa). But commodity traders say corn needs an additional 5 million acres nationally to alleviate the tightest domestic supply situation since the mid-1990s.
The U.S. Department of Agriculture pegged supplies last week at less than half the 1.7 billion bushels of corn in reserve a year ago. Those tight supplies are the prime reason the price of corn has shot up from $3.50 per bushel last June to $6.50 per bushel this month.
Some analysts predict that corn prices will drive through the $7- to $8-per-bushel level if those 5 million more acres of corn plantings don't materialize by March 31, when the USDA reports on its survey of farmer planting intentions.
Ahrenholtz and Coppess said fertilizer sales have been strong but don't indicate a major shift in acres to corn in Iowa.
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