- Published on Thursday, 24 January 2013 05:01
- Written by Russ Quinn, DTN Staff Report
OMAHA (DTN) -- Farmers may see positive news in the upcoming year with the outlook for fertilizer and fuel prices. Experts expect fertilizer prices to be fairly steady and fuel prices to even drop.
However, nothing is guaranteed. Several factors could alter these predictions.
"I think fertilizer prices in 2013 could trend pretty close to steady," says Brent Hall, agronomy manager for South Central Cooperative located in Lacona, Iowa.
Hall is watching closely the decreasing water levels in the Mississippi River, which could lead to supply concerns.
Retail prices could rise if there are problems shipping grain down the river and fertilizer on the return trip. This could lead to a lack of supply.
In early 2012, the inability to get urea shipments up the Mississippi River in the winter months caused nitrogen fertilizer prices to skyrocket through spring.
According to retail fertilizer prices tracked by DTN/The Progressive Farmer, urea's average price the second week of Feb. 2012 was $552/ton and by the third week of May, the price shot to $770/ton, a climb of $218/ton in just 14 weeks. Since reaching this high, urea's price has continued to fall, and returned to levels prior to the supply issue.
While fertilizer will still need to be applied this spring across the Corn Belt, the good news for retailers and farmers is an early harvest allowed a wide window to apply fall fertilizer. Otherwise, there would have been more pressure on the river system to ship fertilizer closer to spring, retailers have pointed out.
Hall said he thinks the early harvest allowed much of the nitrogen to be applied in the Corn Belt this fall. Anhydrous prices should continue to be in the $785 to $885/ton range, while urea could fall to the $650 to $700/ton area in 2013, he said.
Liquid nitrogen should also continue current price ranges, he says.
Hall thinks current phosphorous and potash price levels could continue to hold. Prices could go up or down $50 to $60/ton, but fertilizers have mostly been $600 to $700/ton in recent months.
Matt Rush, a farmer from Fairfield, Ill., also believes fertilizer prices will stay fairly consistent into spring. While he normally locks in some of his nitrogen needs by this time, in late December he had yet to pull the trigger.
"We haven't purchased any of our anhydrous yet for the 2013 crop like we have in the past," Rush told DTN. "The retailers we work with said it might be to our advantage if we wait awhile."
Rush's area of southern Illinois was hit hard in 2012's growing season by drought. While he will return to a normal application of nitrogen for the 2013 season, he may limit phosphorus and potash applications.
While they were still in the process of testing their soils at the end of the year, Rush said so far it looked like there are higher levels of P and K in his Wayne County, Ill., soils. During last growing season's drought, crops did not fully utilize all the P and K nutrients applied, so there could be some carryover of nutrients into this growing season.
"Right now, I don't think we will apply any P and K in the spring," he said.
LOWER FUEL PRICES
Farmers will also be encouraged to hear that fuel prices in the U.S. are expected to be lower in 2013 than 2012, mostly because of better crude oil supply. Fuel prices are seen lower as a result of lower crude costs, said Brian Milne, DTN energy editor.
"This (forecast) is directly related to increased U.S. production through hydraulic fracturing technology," Milne said. "Globally, Iraq is also seen producing more oil."
The U.S. Energy Information Administration (EIA) forecasts Brent crude oil to be $103.75 a barrel in 2013. This compares to $111.57 in 2012 and $111.28 in 2011.
The EIA also expects gasoline and diesel prices to drop this year.
Gasoline is predicted to be $3.43 a gallon in the new year, compared to $3.63 in 2012 and $3.53 in 2011. Diesel is set to be at $3.84 a gallon this year, compared to $3.97 in 2012 and $3.84 in 2011.
Milne pointed out that early in 2012, the market experienced sharply higher crude prices on worries surrounding new sanctions on Iranian oil. While those sanctions are still in effect, the market now knows what to expect, he said.
Milne also said Saudi Arabia produced at record levels in 2012 to offset the lost supply to world markets from the Iranian oil sanctions.
One wild card to watch in 2013, according to Milne, would be demand. Oil demand in the U.S. fell in 2012, compared with 2011, on sluggish economy growth. Some of this could be that consumers are seeing the benefits from more fuel-efficient vehicles, he said.
"Should the U.S. slip into a recession, we should anticipate lower demand and prices than what we expect now," he said. "Should the U.S. economy unexpectedly grow at a greater GDP rate of 2%, we could see oil demand jump and prices would move above the current forecast."
Globally, oil demand continues to increase, driven by emerging economics such as China. Milne said he expects this demand will continue to lend upside support for oil prices.
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