Simple strategies may help in buying fertilizer

Fertilizer prices are expected to be more volatile than in the past due in part to the United States changing from a fertilizer manufacturer and exporter to a net importer. Basically, fertilizer production has moved out of the United States. This change from exporter to importer, according to Phil Kenkel, Oklahoma State University Extension economist, puts price at risk of supply disruption, transportation cost and foreign exchange rates. Natural gas price also may play a role since it is the second most volatile commodity in the world and accounts for 90 percent of nitrogen fertilizer production. In addition, higher world commodity prices may mean increases in fertilizer demand and price.

U.S. crop prices and fertilizer prices may not be correlated. We have had low commodity prices and high fertilizer prices. Since 2008 fertilizer prices have been a roller coaster and the shift to bioenergy crops have help to fuel the volatility according to Kenkel. Fertilizer accounts for about one-third of total crop production costs.

There are some strategies to reduce fertilizer price risk.

-- Fertilizer to commodity price is out of sync.

-- Land tenure is uncertain

-- The fertilizer supply chain is disrupted

Fertilizer prices are likely to remain volatile. A systematic purchasing strategy and flexibility with timing and product may help producers manage the risk.