Fertilizer Prices to Drop Along with Crop Prices

Year-end prices are important for profitability. So is the cost to grow the crop. While crop prices are expected to moderate over the next ten years from recent highs, input costs are also expected to trend downward.

The Food and Agricultural Policy Research Institute (FAPRI) released its long term outlook for agriculture in March. FAPRI provides an index of several input costs.

If we apply these indices to data from Alberta Agriculture and Rural Development, we get rough estimates of how input costs will vary over the next several years.

The average bulk prices for phosphate (11-51-0) and urea (46-0-0) were $695 and $586/tonne in 2013, according to Alberta Ag. Applying the FAPRI forecast, fertilizer prices are expected to drop in 2014 and 2015 before starting an upward trend.

If the forecast is correct urea prices will dip below $500/tonne in 2015, with phosphate dropping to $560. Of course, there’s the impact of seasonality, and further declines in the loonie could produce prices higher than those estimated here.

This is good news for producers expecting lower crop prices. Declining fertilizer prices will give some respite even though margins are expected to remain tighter compared to the past five years.

James Bryan, Agricultural Economics Analyst