Fertilizer prices more than double
Wendy Lee , Tennassean.com, 07 May 2008View original article
Increases push farmers to plant different crops. Farmers like 80-year-old Joe Dement say it's becoming too financially risky to plant corn this year.
Despite high food prices for corn, the prices of essentials such as fertilizer have more than doubled in the past few months, cutting into the wallets of the state's farmers and further raising the risks associated with a life spent in agriculture.
In response, farmers like Dement are choosing to plant soybeans instead of corn because it uses less fertilizer.
The prices of fertilizer, essential for maximizing a crop's potential, have gone up because of more worldwide demand, high freight rates and stubbornly high natural gas prices, according to the Tennessee Farmers Cooperative, owned by 70,000 farmers in the state.
"The cost of putting out the crops is more daunting this year," said Delton C. Gerloff, agricultural economics professor at the University of Tennessee-Knoxville.
For example, DAP, a fertilizer used for beans, corn, pastures and cotton, sold last year for $398 a ton. This year, it sells for $1,000 a ton, according to Arkansas-based Oakley Fertilizer Inc.
Local farmers of a broad range of crops say they're hurt by the price increases.
But analysts said farmers who raise cattle may be hurt the most, because of the need to fertilize pastures and the fact that high grain prices used to feed cattle have outstripped the sales prices for beef cattle.
"This is one of those years where you're just going to have to hang in there," said Ronnie Barron, the University of Tennessee's extension agent for agriculture programs in Cheatham County.
"When you take into account extremely high fertilizer prices, it pretty much wipes out that profit margin."
Tennessee crops and pastures rely on fertilizers made from nitrogen, phosphorous and potassium, and these ingredients can boost yields 20 percent to 25 percent on average, said associate professor Hugh Savoy at the University of Tennessee-Knoxville.
Big fertilizer producers such as Calgary, Alberta-based Agrium Inc. have seen a financial boon with the rising prices. Agrium Inc.said its first-quarter net earnings jumped to $195 million, up from a net loss of $11 million a year ago.
"There is certainly tightness in the market, and at times we need to manage how much you commit to," said Ashley Harris, an Agrium spokesman. Agrium is evaluating plans to expand its potash operations and will complete a nitrogen plant in Egypt in 2010.
"We still see a healthy margin for the farmers and that is proven by the healthy demand for the products," Harris said.
Already, some analysts are saying some agricultural stocks such as Potash Corp. of Saskatchewan Inc. do have the potential to continue to grow because of higher food demand from countries such as China.
"I think the sector in general has plenty of growth left ahead of it," said Morningstar agricultural stock analyst Ben Johnson in Chicago.
Gerloff said this is a crucial year for farmers in part because many are trying to recover from reduced crop yields last year due to drought, and now they're dealing with higher fuel and fertilizer costs.
Dement, who had a normal yield on only about one-third of his soybean crop last year because of the drought, said he hopes to have better results on his 150 acres of this year.
"That's the beauty of farming: We're the biggest gamblers on earth," the Lascassas farmer said. "We pay our good money for seeds and fertilizers and pray for rain. Generally the odds are against us."
