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Fertilizer prices should drop in 2009, study says

Monday, February 23, 2009

Lower fertilizer prices could lead to more corn planting, according to a new study.
Lower fertilizer prices could lead to more corn planting, according to a new study.

Wholesale prices of fertilizers declined dramatically from September 2008 until January of this year and the trend should extend to retail fertilizer prices during the rest of this year.

A combination of factors, ranging from the world financial crisis to dropping demand for commodities, has pushed down wholesale prices of fertilizers. The resulting fall in retail prices could lead to more planting of corn over soy, according to a new report from the Department of Agricultural and Consumer Economics, University of Illinois.

"[R]etail fertilizer prices likely will be lower in the spring as compared to the fall," wrote Gary Schnitkey in the report. "Lower fertilizer prices will increase the profitability of corn relative to soybeans. As farmers make planting decisions, up-to-date fertilizer prices should be used in calculating relative profitability."

In North America, farmer demands have been reduced because of lower commodity prices and higher fertilizer prices. Moreover, much of the corn-belt experienced a late harvest, further limiting fertilizer applications. As a result, there are large amounts of unsold fertilizer in inventory.

The CEO of fertilizer company Agrium estimated that demand in the fall of 2008 was down by 20 percent for nitrogen, 50 percent for phosphate and 50 percent for potash, according to the report.

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