At least one large-scale US Corn Belt farmer is unlikely to materially cut next season's fertilizer spending despite sharp declines in corn and soybean prices.
Hudson Farms operates 5,600 acres in west central Indiana. The farm uses a consistent yearly crop rotation with half of acreage dedicated to corn and half to soybeans. Farmer Chris Hudson has been focused on maximizing profitability with precision agriculture and input cost management.
Even with the 10pc recovery from contract lows in early October, corn prices are down almost 30pc from a year ago. Despite that decline, east Corn Belt fertilizer prices are significantly higher. Ammonia in the region is priced at about $660/st fot, up 17pc year-over-year. DAP prices of around $470/st fot are up 15pc, while potash prices are up 7pc.
This mismatch of revenue potential and input costs has left some farmers considering adjustments to their crop rotation and nutrient management tactics in an effort to preserve profitability. But Hudson plans to make few changes, if any.
The impact to revenue on lower grain prices will be softened by Hudson's marketing strategy, which is to begin opportunistically selling future production two years in advance. The farm's 2015 corn and soybean production is 45pc and 60pc sold, respectively, at higher prices than current values. With crop prices partially locked in, Hudson can focus on maximizing yield rather than cutting costs.
Nitrogen applications in 2015 for Hudson's 2,800 corn acres will likely be unchanged from this year, he said. Hudson thinks the best blend of cost efficiency and agronomic efficacy is side dress ammonia at the "V4" growth stage, which occurs three to four weeks after seeding. Ammonia side dress application provides the cheapest source of nitrogen with the least chance of leaching, and at the time the corn needs it most, according to Hudson.
At current prices, ammonia's $7.17/unit N is at a 15pc discount to urea and 19pc discount to UAN.
"I'm not going to take the top-end off my yield potential [with lower fertilizer application rates]," Hudson said.
Hudson's fall phosphate and potash applications should also be unaffected by the crop price environment, and usage could even be higher depending on nutrient uptake from the strong crop being harvested. Hudson relies on soil sampling to determine phosphate and potash application needs, and expects to put back whatever this crop took out.
The decline in crop prices did increase Hudson's sense of urgency to make some changes with other crop input procurement. The operation had been buying seeds, herbicides, pesticides and fungicides from a retailer. Starting in the 2015 season, Hudson will be getting these products through a farmer buying group, which he estimates will save about 20pc on the seeds and chemicals bill every year by avoiding the retail markup.
With Hudson Farms' scale and geographic advantage, the operation is low on the cost curve for both corn and soybeans so current crop prices are less of a threat to profitability. Growers with lower yield potential, less scale, or with less production previously sold could be faced with tougher decisions.
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