Adjusting Fertilizer Management for High Nitrogen Prices in Eastern Canada
By Tom Bruulsema, Harold Reetz, Ivan O’Halloran, and Brian Sanderson1
The possibility of high nitrogen (N) prices demands consideration for 2003 crop management plans. High prices are one of many factors determining the most economic rate. They also make it more important to predict that rate accurately.
A cold winter and a spike in natural gas prices have left many producers wondering what will happen to prices and supplies of N fertilizers. What’s the rational response?
To make rational adjustments, one needs to know:
the prices for fertilizer and crop, and the ratio between them
the response function that describes how fertilizer increases yield
the total cost and return picture for the crop
Prices and Price Ratios
Prices of N fertilizer and of corn have varied considerably in the past 10 years (Figure 1). Since corn is one of the major commodities using N fertilizer, their prices show some degree of correlation.
Figure 1. Changes in urea and corn prices over the past decade in Ontario.
The N/crop price ratio is calculated as the price of N divided by the expected selling price of the crop, both in dollars per pound. Costs that vary per unit of yield — such as drying costs — should normally be deducted from the selling price. This ratio has varied from 4.8 to 7.0 in Ontario in the last 10 years (Figure 2). As of early March, the current price of urea fertilizer equates to C$0.41 per pound of N, and the current futures price for new crop corn is C$3.29 per bushel, a ratio of 7.0. Of course, both fertilizer and crop prices could change dramatically yet this year.
For potatoes, the price ratio has varied more than for corn (Figure 2). This is due in part to wider fluctuations in potato price, and less impact of potato prices on N fertilizer prices. The ratio has ranged from 3.7 to 8.1 in the past decade in Prince Edward Island. The current price ratio of 5.8 assumes a potato price of C$7.20/cwt and the same N price as above.
Figure 2. Price ratio has varied more for potatoes than for corn.
Response Curves: What difference does price ratio make?
The ratio between the prices of fertilizer and crop determines the most economic rate to apply, because most crops show a diminishing response to fertilizer as rates increase. When the price ratio increases, the most economic rate falls. Figure 3 shows the effect of the full range in price ratios observed in the past 10 years on the most economic rate of N, for two examples. One is based on recent data from a production corn field in Ontario, and the other is from one year of an experiment with Russet Burbank potatoes in Prince Edward Island.
Figure 3. Responses of corn and potatoes to N, with most economic rates for the range of price ratios encountered in the past ten years.
With crops of higher value, price ratio has less impact on the most economic rate. For example, the most economic rate of N for potatoes shows a narrower range than for corn even though the potato price ratio varied more widely.
Response curves can vary from site to site. Four examples in Table 1 indicate that across a range of field situations – differing in yield level, previous crop, and manure use – the impact of increasing price ratios on the most economic rate varies. Increasing the price ratio by 25% over the highest ever observed cuts the most economic rate by 5 to 27% compared to the current price ratio. To accurately estimate both the most economic rate and the impact of price ratio, you need to experiment locally with different rates.
Table 1. Most economic rate of N for corn varies more by field than by price ratio in recent field experiments in Ontario.
Response curves can also vary widely year to year. The data shown in Table 2 are for Russet Burbank potatoes grown in rotation with barley and red clover. Increasing the price ratio by 25% above the highest ever observed cuts the most economic rate by 4 to 13% compared to the current price ratio. For other specialty crops including cole crops, tomatoes, peppers, etc., higher N prices would likely have similar small decreases in the most economic rate.
Table 2. Most economic rate of N for potatoes varies more by year than by price ratio in Prince Edward Island.
Predicting the Most Economic Rate
With higher N prices, it becomes more important to fertilize at the most economic rate … which may differ from the rate you’ve applied in the past. So far we’ve seen that most economic rates can vary widely with growing conditions, and that price ratio is one of the factors that determine them. But at the same time, consider all of the influential factors specific to your local situation because several of them can be more important than price ratio:
Attainable Yield – even though some low yield sites have high N requirements and vice versa, a large crop takes up more N than a small one. In Ontario, studies have shown little direct relationship between attainable yield and most economic rate. However, that may have been due to large variations in some of the following factors.
Previous crop – legume or non-legume? C:N ratio of the crop residues? Use local information sources to determine the appropriate N credit.
Manure credits – adjust for volatilization of N from freshly applied sources, and for mineralization of N from previous applications. Apply uniformly. Find out the analysis and rate.
Soil N tests – nitrate tests in early June, when the corn is about 6 to 12 in. tall, give an indication of the soil supply. Interpret the test results in combination with the information on other factors.
Split application – apply some N with the starter, and the rest at sidedress time. The seedling needs a good N supply, but uptake for corn doesn’t amount to much until the last half of June.
Inhibitors – a urease inhibitor can effectively limit volatilization losses of N from surface-applied urea or urea-ammonium nitrate
Crop sensors – sidedress applications based on remotely sensed crop color are a promising tool for site-specific variable rate application.
Current practice - recent field experiments indicate that the most economic rate is more often below than above current practice. There is opportunity for many producers to reduce N rates by using best management practices.
Use proven crop production practices – N use efficiency will be optimized when soil pH, P and K levels are maintained at the optimum level. Use proven practices to control weeds, insects and diseases; and plant adapted, high yielding varieties for your area.
Consider switching sources – the natural gas price spike, coming late in the winter, is likely to affect prices of some sources more than others. Compare price per pound of N as anhydrous ammonia, urea, urea-ammonium nitrate, ammonium sulfate, ammonium nitrate, calcium nitrate, and potassium nitrate.
Costs and Returns
Applying N at the most economic rate does not guarantee a profitable crop. Profit is determined by the difference between total revenues and total expenses. If N prices go too high, then crops that need more N will not be as profitable relative to crops that need less. The most obvious crops to switch to would be legumes such as soybeans. However, in times of high N prices, many others are considering the same thing, leading to changes in the selling prices for the major crops. High N prices make it more likely that corn prices will increase. If natural gas prices stay high, it may mean increased drying costs for corn as well. The relative profitability of different crop options is very difficult to predict.
1Dr. Bruulsema is Eastern Canada/Northeast U.S. Director for the Potash & Phosphate Institute (PPI); e-mail: tbruulsema@ppi-far.org. Dr. Reetz is PPI Midwest Director; e-mail: hreetz@ppi-far.org.
Dr. O’Halloran is a Professor with Ridgetown College, University of Guelph.
Mr. Sanderson is a Research Scientist with Agriculture and Agri-food Canada.
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