Wednesday, August 17, 2022

Economics Tilts to NH3

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by Russ Quinn, DTN Staff Reporter

AMES, Iowa (DTN) — With urea prices climbing back to the levels of the not-so-good old days of late 2008, some farmers who use the dry nitrogen fertilizer say they are inclined to move away from it and begin to use less expensive forms of nitrogen.

Just three years ago, farmers paid about the same for urea as they did for anhydrous on a dollar-per-pound-of-N basis. Since then the gap between the two fertilizers in DTN’s national average retail survey has widened dramatically, with anhydrous now running about 20 cents per pound of N less than urea. Liquid UAN fertilizers remain the most expensive form of N in DTN’s weekly surveys of more than 300 retailers nationwide.

For example, a typical Midwest corn grower with a 220-bushel yield goal might apply 180 pounds of actual N per acre on corn after soybeans. At current prices, that’s a $36/acre advantage for anhydrous over urea.

VOLATILE PRICING

With retail urea prices up about 40{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} in the last 12 months, United Suppliers’ Fertilizer Division Manager Matt Carstens admits “urea is a dangerous product from a market volatility standpoint.” Since June, it has added $100/ton to its average retail price in DTN’s national surveys. At $620/ton, it even surpasses its 2008 peak and discourages retailers from ordering at prices they fear they couldn’t recover next spring.

Iowa-based Carstens blames that situation on the fact that about 60{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} of urea is imported, so the U.S. fertilizer chain must battle in international markets. What’s more, it is subject to the weak dollar, which makes imports more expensive. Domestically produced ammonia and UAN offer slightly more price stability, he argues, but even their average retail prices have jumped 26{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} to 28{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} in the past year.

As a product, ammonia poses more safety and environmental hazards and takes much longer to apply than other types of N, noted DTN Contributing Agronomist Dan Davidson. Plus custom application runs about $12.50/acre for anhydrous versus $6/acre for urea. “There is a time and equipment cost, plus tendering all those ammonia tanks one by one by one. If you factor in equipment, fuel, time, hassles and safety working with NH3, the difference (in price of anhydrous vs. urea) is not as great as some people think,” Davidson said.

Still, some farmers are taking notice. Brian Sampson, who farms 1,500 acres of corn and soybean and feeds out 1,500 cattle a year near Nevada, Iowa, has used urea along with liquid nitrogen in recent years as a nitrogen fertilizer source. While some farmers have a favorite form of nitrogen, Sampson is not married to any nitrogen fertilizer.

“I don’t have the horsepower or the manpower to put on anhydrous but we did put some on in the fall last year for the first time in many years,” Sampson said. “I think it is only logical to believe if urea stays at these current price levels guys will start to use other sources of nitrogen.”

His experiment with anhydrous last fall left him with a good impression of anhydrous and the newer application equipment. This combined with a lower price might convince him to use more anhydrous in the future.

Paul Teig, who grows corn and soybeans near Roland, Iowa, has used all three forms of nitrogen on his farm in recent years. He has applied anhydrous in both the fall and spring and has applied both urea and liquid nitrogen in the spring right before corn planting.

Much like Sampson, Teig also believes farmers who have used urea in the past will not stick with the fertilizer if it stays at the current historic price levels.

“Our goal as farmers is to make a profit and it is getting harder and harder to do this with rising input prices,” Teig said. “I think some guys are loyal to urea but only up to a point. If you can get the same thing from anhydrous or liquid N and it is less expensive, I think most farmers will not hesitate to make the switch.”

NO CHOICE

Bob Finch, who farms near Ames, Iowa, with his son, Heath, has no choice but to use urea as he applies it to his pastures for his cattle. Unlike crop production, cattlemen are pretty stuck with the dry urea to provide nutrients to their grass.

“High prices or not we have to apply the urea to the pasture,” Finch said.

Finch also has some concerns about what effects shifting away from urea will have on the overall supply and demand situation of the other forms of nitrogen fertilizers.

Most fertilizer retailers have a set amount of urea, anhydrous and liquid capacity, he said. A movement to liquid or anhydrous could set the stage for shortage of the other two fertilizers.

“We currently have the infrastructure to use all three of these products but a shift away from one could cause some issues with the supply chain,” he said.

Another group of farmers who face limited choices in nitrogen fertilizer are southern plains wheat growers attempting to finish up winter wheat seeding. While some wheat farmers will apply anhydrous right before seeding, a majority of growers use urea.

Mike Miller, location manager for the Mulvane Cooperative Union in Mulvane, Kan., said his customers who apply urea are not very excited about these higher prices but they haven’t substituted other products.

“Guys thought it was high last fall and cut back applying urea then so I think most of them realize they cannot do that again. so they are applying it even with the high prices,” Miller said.

Urea is a popular nitrogen source in the Southern Plains before seeding because the fertilizer is easy to handle and apply compared to anhydrous, according to Miller. Of course the downside to urea, at least currently, is the high price tag, he added.

DTN’s Marcia Zarley Taylor contributed to this report.

 

© Copyright 2011 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

Posted with DTN Permission by Haylie Shipp

 

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