By Greg LaBarge, Ohio State University Extension
Other than land cost, nitrogen is the highest-priced input we pay for in the corn production budget. All signs are that volatile nitrogen markets will be with us for the 2023 crop. Recently, farmdoc daily looked at Illinois price fluctuations since June 2022. The high of $1,635 was on June 2, and the low of $1,153 happened on Aug. 25. By Oct. 6, prices are up to $1384. The volatility will likely remain due to uncertainty about natural gas prices from continued Ukraine-Russia tensions and unknown U.S. winter heating 2022-2023 season. What do natural gas prices have to do with nitrogen prices? Natural gas is key to the industrial fixation of nitrogen through the Haber-Bosch process. Natural gas is 75% to 90% of the operating cost for nitrogen production.
An October 2022 article from the farmdoc daily crew at the University of Illinois discusses tools for managing nitrogen price risk. You can find the complete article at https://go.osu.edu/nitrogen2023.
Some key points:
- Spread risk by pricing N on different calendar dates. Using multiple price points can result in a lower average price.
- Nitrogen rates are one place to manage risks. Overapplication will increase the cost. Using the Maximum Return to Nitrogen (MRTN) tool helps you see the impact of N and corn prices on returns to added nitrogen. For Ohio, using $1,400 per ton anhydrous and $6 per bushel corn, the MRTN rate is 163 pounds per acre in corn following soybeans.
- There is a risk management advantage to delaying a portion of N application until after planting. The delayed application allows N rate adjustments for current prices and growing conditions.
Delayed application has a risk that weather conditions will be too wet to make the after-plant application. A pilot crop insurance tool, Post Application Coverage Endorsement (PACE), is available for the 2023 crop in the northwest corner of Ohio to cover weather risk with after-planting N applications. PACE is addon coverage to your crop insurance coverage similar to hail insurance. Rates are $1 to $7 per acre, depending on coverage level. Pilot counties included are Williams, Fulton, Lucas, Defiance, Henry, Wood, Paulding, Putnam, Hancock, Van Wert, and Allen.