Tom Hall, Senior Agronomist, Rooster Strategic Solutions
February is normally a quiet time on the farm, focusing on final preparations for spring planting. This year, however, is far from normal. And if you asked a farmer what’s up on their farm, they’d likely tell you fertilizer prices – particularly anhydrous ammonia – as well as record-high soybean future prices, and concerns over their financial futures in an age of higher production loans and rising interest rates.
What’s up on the farm? Uncertainty, and lots of it. Farmers have always faced variability around commodity prices, input costs, and debt, not to mention the weather. But this normal variability, on top of the pandemic and related supply disruptions, has led to much higher levels of concern than normal.
The Purdue Ag Economy Barometer (below), which measures farmers’ perceptions of the Ag Economy, shows that the positive mood farmers enjoyed from higher commodity prices early in 2021 has turned much more pessimistic.
Soaring fertilizer prices are the primary cause of this new pessimism. Nitrogen fertilizer is in short supply, causing prices to triple since 2021 (below), with no relief expected anytime soon.
The future prices of soybeans are also peaking (below), soaring past the $15-per-bushel mark for March 2023 contracts. Soaring soybean prices are generally a nice problem for farmers, but these record prices will have a major impact on crop mix planting decisions this spring. Farmers may decide to switch out corn to beans, particularly in fields that haven’t had a nitrogen application yet. Switching crops in February is doable, but causes headaches in terms of changing seed orders, reviewing the impact on tillage, revisiting crop protection purchases, and updating farm budgets.
- Before switching acres to soybeans, consider the rotational effects. For instance, some fields with resistance to weeds may be poor choices to go back into soybeans.
- A great tool for farmers to manage nitrogen costs is the Marginal Return of Nitrogen (MRTN) calculator found at Nitrogen Rate Calculator (iastate.edu). This tool, based on trials across the Midwest, estimates the rate of nitrogen based on marginal return. It’s easy to use; simply select your state, enter the price per ton or pound of nitrogen, and expected price per bushel of corn. In the example below, we set the price of nitrogen at 0.73 cents per pound and the price of corn at $5.00. The calculators show that a profitable range of nitrogen is 163 to 188 pounds per acre.
In a time of soaring costs, we believe that MRTN is a good friend to have on your side. If you have friends, clients, or partners who farm, make sure they’re aware of this tool.