A steep drop in fertilizer prices over the fall and early winter has enabled some Manitoba farmers to save big bucks on their crop-input costs for next spring.
"I bought all of my fertilizer last week and it was considerably cheaper than last year," Keystone Agricultural Producers (KAP) president Doug Chorney said in a recent interview.
How much cheaper? Chorney paid $785 a tonne for nitrogen fertilizer, compared with $1,050 a tonne around this time last year. That's a savings of about 25 per cent.
Brothers John and Hubert Preun, who farm about 6,500 acres near Selkirk, have also bought all of the fertilizer they'll need for this spring. They made their purchases last summer when prices were even lower -- about $725 per tonne for nitrogen fertilizer.
That was $100 a tonne less than what they paid the previous summer, John Preun said. And since they buy about half a million dollars worth of fertilizer each year, it added up to a substantial savings for them.
Chorney and the Preuns aren't the only ones who have taken advantage of the lower prices.
"A lot of farmers have bought (their fertilizer) already," Rick Remple, manager of western Canadian sales for fertilizer wholesaler Agrico Canada Ltd.
And it's a good thing they did. Remple and Steve Biggar, assistant vice-president of fertilizer and energy products for Richardson Pioneer, said fertilizer prices have rebounded in the last few weeks. Biggar said the spread is now only about $20 to $40 a tonne, not the $100 it was back in the summer, fall and early winter.
Biggar said while some Richardson Pioneer customers have taken advantage of the lower prices and have already purchased their fertilizer, the number of early-bird buyers hasn't been any higher than usual. He thinks one of the reasons for that might be farmers often use the same bins to store grain and fertilizer. And their bins may be full of grain from last fall's bumper crop, so they have to wait until they can sell some and free up storage space before buying their fertilizer.
Chorney attributed last year's drop in fertilizer prices to falling grain prices, which he estimated have plummeted about 30 to 40 per cent in the past year. But Agrico's Remple thinks it has more to do with supply and demand. China exported more nitrogen fertilizer in 2013, he said, which boosted world supplies and drove down prices.
While lower fertilizer prices are good news for farmers, Chorney said it's being overshadowed by the drop in grain prices in the last half of 2013. He said many farmers use the money they make from the sale of their grain to pay for fertilizer and other inputs such as seed, herbicides and diesel fuel. And the less they get for their grain, the less money they have to spend on inputs.
"So my biggest concern is whether the commodity markets will continue to collapse," said Chorney.
He also noted getting their grain to market continues to be a challenge for most farmers because last fall's record harvest has completely plugged the country-elevator system. And that's forced many grain companies to scale back or delay purchases of farmers' grain until they can free up space in their elevators.
"I have 17,000 bushels of wheat and I can't sell it to anybody," the KAP president said.
He even contacted a grain company in North Dakota to see if it would be interested in buying his wheat. But they also had a big crop south of the border, so the company told him it would only buy Canadian grain if it received a discount of 50 cents a bushel, Chorney said.
"So much for free trade," he added.
He also noted while fertilizer prices are down, diesel fuel prices are about 25 per cent higher than they were a year ago. And the price of seed hasn't declined despite the big drop in grain prices.
"So we really need to see (grain) prices rally in the next six months," Chorney added.