Update on Farm Input Prices

Crop Inputs
Update on Farm Input Prices
by Ken McEwan, Ridgetown College - University of Guelph

Fuel, fertilizer and pesticides represent 35% to 40% of cash operating expenses on many commercial cash crop farms in Ontario. As agricultural markets become more global, competitiveness in input pricing has received more attention. The Ontario Farm Input Monitoring Project was developed to provide consistent price data, and thus advance the discussion regarding pricing differences in agricultural inputs between Ontario and nearby U.S. states. The data exhibited in the following tables was supplied by this project, funded by Agriculture and Agri-food Canada.

Table 1: Five-Year Summary of Fertilizer Prices (1998 - 2002)
Fertilizer Product	Ont - 2002 C$/T	Ont - 5 Yr Ave C$/T	U.S. - 5 Yr Ave C$/T	Ont vs U.S. Percent
	Ont - 2002 C$/T	Ont - 5 Yr Ave C$/T	U.S. - 5 Yr Ave C$/T	Ont vs U.S. Percent
Anhydrous Ammonia	461	476	466	102.3
Urea- 46%	322	330	340	97.2
Nitrogen Solution- 28%	222	227	233	97.2
Ammonium Nitrate - 34%	319	321	380	84.4
Mono-Ammonium Phosphate	408	423	422	100.2
Di-Ammonium Phosphate	395	416	403	103.2
Triple Super Phosphate	384	397	377	105.4
Muriate of Potash	263	255	258	98.9
Liquid 10-34-0	460	449	419	107.2

Table 2: Estimated 2003 Price For Fertilizer Products
Fertilizer Product	5 Yr Ave % Change	Ont - 2002 C$/T	Est. - 2003 -	% Change From 2002
-	5 Yr Ave % Change	Ont - 2002 C$/T	Est. - 2003 -	% Change From 2002
Anhydrous Ammonia	5.5	461	568	23.2
Urea - 46%	2.3	322	365	13.5
Nitrogen Solution - 28%	5.2	222	266	20.0
Ammonium Nitrate - 34%	0.4	319	335	4.9
Mono-Ammonium Phosphate	-1.5	408	393	-3.6
Di-Ammonium Phosphate	-1.6	395	387	-2.1
Triple Super Phosphate	-1.6	384	364	-5.0
Muriate of Potash	2.7	263	275	4.6
Liquid 10-34-0	1.8	460	472	2.5

Table 1 provides an overview of 2002 Ontario fertilizer prices with a comparison of five-year average prices between Ontario and the U.S. As the table shows, 2002 prices were typically lower than the five-year average. The highest price year for fertilizer was 2001; the lowest was 1999. When the five-year average price for Ontario is compared to the U.S. five-year price for fertilizer, results are mixed. Ontario prices were lower for 4 products, but higher for 5. In general, the size of the price difference between Ontario and the U.S. tends to be modest - in the range of 2% to 3%. Liquid fertilizer in Ontario - at 7.2% higher - had the largest price difference compared to the U.S.

Table 2 provides some insights into what Ontario farmers might expect for fertilizer prices for 2003. A computer forecasting tool was used to predict 2003 prices based on those seen between 1998 and 2002. From the table, it is possible to see that nitrogen fertilizer products are expected to rise while phosphate and potash prices are likely to remain relatively unchanged. For example, Urea is estimated to be 13.5% higher in 2003 than in 2002, while Di-Ammonium Phosphate is predicted to fall by 2.1%. These predicted prices seem to fall in line with what the trade is currently thinking. The farm input industry generally thinks that nitrogen prices will increase by at least 15% and perhaps more, depending on what happens to fuel prices, while phosphate and potash prices will remain flat.

With respect to pesticide prices for 2003, it is most likely that on average they will increase by 2% or 3%, similar to past years. Typically, mainstream pesticide products do not experience volatile price fluctuations. As for fuel, it is very unclear where prices are headed given the uncertainty in the oil markets caused primarily by unrest in the major oil-producing countries.

In summary, it is expected that nitrogen fertilizer prices will be up by about 15% while phosphorous and potash prices remain similar to those in 2002. Pesticides are likely to be 2% or 3% higher, while fuel prices are likely to be volatile and probably headed upwards.