Lower Input Costs on the Horizon?
If that lower input cost is fertilizer, it might just could be in lower your future. Did I put enough emphasis on the “maybe” in that scenario? Fertilizer prices have continued their more than year-long decline through the first two weeks of August 2023.
The University of Illinois’ FarmdocDAILY website shows that on a per pound of nitrogen basis, urea and liquid nitrogen fertilizers have historically been priced at a premium of 35 to 40 percent above anhydrous ammonia. However, the premium narrowed in 2022 as the Russia-Ukraine conflict disrupted global fertilizer markets. The premium on liquid, relative to anhydrous, has returned to more historical levels while the gap has continued to narrow between urea and anhydrous prices. This is attributed to continued expansion in global production capacity combined with lower demand prospects.
What does that all mean? Well, there is a continued decline in fertilizer prices meaning improved return and income prospects as we look ahead to 2024. What’s more, if the low premium on urea relative to anhydrous extends into the coming months, it may make urea a more attractive nitrogen option for farmers next year.