When is anhydrous ammonia cheap at $1,300 per tonne? Answer: Maybe now, because some are suggesting that it could soar to as high as $2,000 a tonne by next spring.
Palpable fear was in the air when the subject came up during last week’s Keystone Agricultural Producers general meeting in Brandon.
Robert McLean, vice-president of the 4,200-member farm group, noted that he paid $760 a tonne, a price previously unheard of, for 82-0-0 in the fall of 2007.
“I’m being told that I can cut a deal today if I’m willing to pay $1,330 per tonne if I pay for it by July 30,” said McLean, during a discussion about soaring input costs for everything from tires to steel grain bins.
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“They say that’s a deal and I should take it.”
KAP president Ian Wishart said members have been receiving calls regarding special offers from retailers.
“I know that a number of producers are getting calls from their local dealer asking them to buy product now – put your cash on the dash right now – saying that the price is only going to get worse by next fall,” said Wishart.
“We really have no way of knowing if this is true or not in terms of which way the price is going,” he said.
Main industry newsletters predict continuing price increases. However, there are dissenting viewpoints that claim prices have peaked and are poised to fall.
Wishart noted that North America is a net importer of nitrogen and phosphorus fertilizers, which often come from less-than-stable parts of the world.
“What (the dissenters are) saying is that if we have adequate imports and adequate production in North America, we shouldn’t see significant shortfalls,” said Wishart.
George Grant, of KAP district 8, said that availability of supply last fall was an issue for him, with only one tank arriving every four days.
“Remember the buzzword in February and March, when grain prices were stupid? The cure for high prices is high prices. I think that’s going to apply to fertilizer as well,” said Grant.
“I haven’t summerfallowed in six years. If I’m looking at $100 an acre for just one input, there’s going to be ground that’s not going to get seeded.”
He added that his neighbours agree that if fertilizer prices rise too much, they’ll put land into chemfallow.
“They just won’t pay that kind of money for fertilizer,” said Grant.
High fertilizer prices directly affect the viability of many prairie farmers. Many wonder how long high grain prices will continue to soften the impact.
“Damned straight it scares the hell out of me,” McLean said.
“I told my daughter who graduated last spring that the price differential for what I paid for fertilizer last fall to what I’m going to have to pay forward is enough to buy her a house in Winnipeg. That’s just the difference, not the total,” he said.
“Why are we scared? When canola goes from $15 to $11 a bushel, we’ll be in big trouble.”
Bill Campbell added that a collapse in commodity prices that could result if speculators abandon the market would see “guys going broke left and right.
“They’re riding a wave. When it starts to crash they all bail out,” said Campbell.
Buying fertilizer in mid-summer could complicate a farmer’s operation and create a cash flow predicament, he added, because storing it would leave less space for grain.
“They want us to buy inputs 12 months ahead? It would be like 30 months from the time you bought your fertilizer until you got final payment,” said Campbell.
If fertilizer hits $2,000 per tonne, many farmers won’t use it, he predicted. “The rich will buy it, but the others won’t.”
Frank Perrin, manager of Munro Farm Supply in Portage la Prairie, said that farmers who suspect prices are set to climb before next spring would be wise to buy fertilizer early.
“Who knows what the market is going to do as far as pricing on ammonia goes? That’s the question everybody is asking themselves. The indication is that it’s going to get stronger. Maybe now is the time to buy,” said Perrin.
“There’s always people who want to prepay. Time will tell whether they are correct or not.”
