Prairie farmers who have cinched their belts tight are going to have to punch in one more hole.
Forget about the hike in the price of diesel fuel – fertilizer prices are on the rise.
“My big concern for farmers right now is what the hell is happening with fertilizer because that’s the one that is going to put a squeeze on the margins more so than the temporary increase in the price of fuel,” said Lloyd Andruchow, Alberta Agriculture’s head of program development and evaluation.
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Andruchow said a poll of input providers in the Edmonton area shows that prices for nitrogen fertilizer rose to between $260 and $280 per tonne late last week from $215 per tonne one month ago.
“I’m not getting any calls on fuel at all, I’m getting calls on fertilizer.”
Farmers who did well in 1999 bought their fertilizer early, but those who did poorly will have to pay the higher prices.
“The guys who are struggling and don’t have the cash are the ones that are going to end up buying in spring because they’re waiting for government support programs or some sort of cash injection into their operations,” said Andruchow.
Steve Seay is the editor of Green Markets, an independent newsletter in the United States that covers the fertilizer industry.
He said the New Orleans barge price for granular urea rose $52 to $58 per tonne between the beginning of January and last week.
Analysts believe fertilizer prices may have bottomed out and could be on the rise again.
“The urea industry has pretty much had a huge cratering of prices in recent years,” said Seay.
Harry Baumes is senior vice-president of agriculture with WEFA, a U.S.-based economic consulting company that also tracks fertilizer prices. His numbers coincide with Seay’s.
Baumes said part of the increase is seasonal, but part of it is due to fertilizer companies curtailing production in the second half of 1999.
Higher natural gas prices also force fertilizer prices higher since nitrogen is made from natural gas.
Andruchow said higher fertilizer prices may force some farmers to consider alternative crops.
“Some crops like peas that fix nitrogen or don’t require much fertilizer at all are a lot more attractive than something like wheat or canola, which you really need to use a lot of nitrogen to get profitable yields.”
Those who stick with more traditional crops may want to do a diminishing return calculation to figure out the optimum amount of fertilizer to apply.
Linking with other producers to take advantage of bulk buying discounts is another option farmers may want to consider.
Steve Nixon is the general manager of Farmers of North America Inc., a company that passes on bulk buying discounts to its members.
Six weeks ago the group’s price for nitrogen fertilizer was $200 per tonne; now it’s $239 per tonne. Despite the jump, Nixon estimated farmers could save $1,600 to $1,700 on a semi-load of fertilizer through bulk buying.
