Should Higher Nitrogen Prices Translate into Lower Applied Rates?

Mike Rankin
Crops and Soils Agent
University of Wisconsin - Extension

        The high price of natural gas (and energy in general) has resulted in higher prices for nitrogen (N) fertilizer sources in 2001.  Local suppliers have done a good job of stockpiling nitrogen fertilizers for the spring planting and they've indicated that many producers have pre-booked fertilizers at an early discounted price (at least compared to "in season" prices).  Table 1 shows the nitrogen prices for anhydrous ammonia (NH3), urea, and urea ammonium nitrate (UAN).  The low price is reflective of those "pre-booked" and the high price indicates current market estimates.  Total cost of applied N will depend on method of application, who makes the application, and N source. 

Do I lower my normal rates given the higher prices?

        The first question that comes to most producers' minds is "Will it pay to cut nitrogen rates on corn?"  A simple way to address this question is to consider that cutting N rates by 30 pounds per acre equates to a $7.20 per acre savings if your cost is $0.24 per pound of actual N.  This dollar amount in savings translates to 3.6 bushels of $2.00 per bushel corn.  Thus, if you cut the N rate by 30 pounds of N per acre and lose more than 3.6 bushels of corn per acre, a poor decision was made.  The decision gets worse if you capture a higher corn price.

        Another way to analyze the impact of higher N prices is by looking at the corn price to N price ratio.  In most years, a worst case scenario corn:N price ratio is considered to be 10.0 (for example, $2.00 corn divided by $0.20 N).  In 2001, this ratio could approach 8.0 with the right circumstances ($2.00 corn and $0.25 N).  However, even at this ratio, it's probably not prudent to lower rates given the volatility of grain markets.

            I've developed a simple Excel spreadsheet program that allows producers to compare various scenarios of N source, N price, and expected corn price and look at the dollar return per acre with each set of circumstances.

Even more important - don't over apply N

            For most of our medium and fine textured soils, we need to insure that the corn crop has 160 lbs. N available per acre.  Higher fertilizer prices will mean that not taking proper nutrient credits from manure and legume sources will be more costly.  Although most producers are aware of the first-year credits following manure applications or a forage legume stand, there are also legitimate second-year credits.  For example, a second year corn field in 2001 (alfalfa terminated in fall, 1999) can be credited 50 pounds of N per acre.  The second-year N credit for manure is 1 pound for each ton of solid dairy manure applied per acre in the fall or winter of 1999 and 2.5 pounds of N for each 1000 gallons of liquid dairy manure applied.