2016 SE Hay Convention Presented by Fertilization Outlook for Hay Producers

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1 Over the next few minutes Projected Production Costs The False Economy of Shortcuts Fertilizer Value of Different Forage Crops Extension Forage Specialist Crop and Soil Sciences UGA Fertilizer Industry Trends - Supply/Demand - Changes in Capacity - Imports and Consolidation - Price stability/decline? Bermudagrass Hay Production 216 Breakdown of Projected Costs per Acre (f) (e) $163 $ (d) $15 (g) $2 (a) Fertilizer (b) Fuel and Maintenance (c) Pesticides (d) Interest on Var. Costs (a) $196 (e) Labor (f) Fixed & Mgmt Costs (g) Lime (c) $55 (b) $58.25/acre or 5.5 tons/a $6 Forage Cost ($/lb) = Total Cost ($/Acre) Forage Yield (lbs/acre) The False Economy of Shortcuts Cost of Production Compared to Average Yield (t/ac) 6% 75% 9% 1% 11% 125% 8 $5 $56 $68 $75 $83 $9 7 $51 $6 $77 $86 $9 $17 6 $6 $75 $9 $1 $11 $125 5 $72 $9 $18 $12 $132 $15 $9 $113 $135 $15 $165 $188 3 $12 $15 $18 $2 $22 $25 Soil Test and Follow Fertility Recommendations Sample hayfields every year and 1/3 of your pastures each year. Extension Forage Agronomist 1

2 Annual Nutrient Removal by the Primary Hay Crops in the South Nutrients Removed (lbs of Nutrient/Acre/Year) Alfalfa Bermudagrass Orchardgrass Perennial Peanut Tall Fescue 5 Nitrogen Phosphate Potash Calcium Mag Adapted from Southern Forages, 27 and Myer et al, 21. Price ($/lb of N, P 2 O 5, or K 2 O) Fertilizer Prices Urea 5-6% nitrogen Triple-Super-phosphate (6%) Potassium chloride (6%) Adapted from: USDA-ERS and USDA-AMS Reports World N Supply/Demand Balance Demand Capacity 12% 3% 5% 22% 11% (% of Total NPK Demand) Total NPK Use in the U.S. Demand is Driven by Corn 7% Corn Wheat Soybean Cotton High Value Crops Other Source: Glen Buckley, NPK Fertilizer & Advisory Service, Nov Influence of Corn on N Price Million tons % +8.6% Source: UN FAO, 215. Current world fertilizer trends and outlook to 218. Source: Bryce Knorr, FarmFutures.com ( Extension Forage Agronomist 2

3 Tons of Product N Fertilizer Products Sold in the U.S. Actual Product 1,, 12,, 1,, 8,, 6,,,, 2,, - Anh. Amm. Amm. Nit. N Solns Urea N Fertilizer Products Sold in the U.S. Actual N Applied Tons of Actual N 5,, Anh. Amm.,5, Amm. Nit.,, N Solns. Urea 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, Source: USDA Economic Research Service ( Million tons of Nitrogen U.S. N Use is Dependent Upon Imports 22 2 Import Domestic % 5.8% U.S. N Production is Rapidly Expanding (% of Total Urea Imports) Urea Imports by Country U.S. UAN 32% Prices (FOB Gulf Barge - $/ton) 12% High End 7% 6% 11% 35% Middle East Canada China Egypt Trinidad Other Expected Low End 28% Source: Glen Buckley, NPK Fertilizer & Advisory Service, Nov Source: Bryce Knorr, FarmFutures.com ( Extension Forage Agronomist 3

4 216 SE Hay Convention Presented by U.S. Petroleum and Other Liquid Fuels Supply U.S. Energy Production by Fuel Adapted from U.S. Energy Information Administration's Annual Energy Outlook 21 Adapted from U.S. Energy Information Administration's Annual Energy Outlook 21 U.S. Natural Gas Imports and Exports (trillion cubic feet) U.S. Electricity Generation (Billion kilowatthours) Adapted from U.S. Energy Information Administration's Annual Energy Outlook 21 Adapted from U.S. Energy Information Administration's Annual Energy Outlook 21 Phosphorus Supply U.S. P Use and Exports Phosphorus over short term appears stable 1 Million tons of Nitrogen Price of MAP/DAP may be suppressed by inc. imports from Morocco & Russia. - 5%+ increase in imports in 21 & Morocco has % of world s supply of P Long term supply is questioned. - US has 19% of world s supply of P - 65% of that comes from one area (Tampa) - Estimates are that this resource will last 3-1 yrs. Export Domestic % 31.2% Extension Forage Agronomist 211

5 World P Supply/Demand Balance Demand Capacity +17.8% U.S. DAP Price Forecast (FOB Tampa - $/metric ton) High End Million tons Expected Low End % Source: UN FAO, 215. Current world fertilizer trends and outlook to 218. Source: Bryce Knorr, FarmFutures.com ( Million tons World K Supply/Demand Balance 212 Demand Capacity +28.% +2.% Source: UN FAO, 212. Current world fertilizer trends and outlook to Million tons of Nitrogen U.S. K Use and Imports 9 8 Import Domestic % 78.% ,85 (Million Metric Tons) Potash Supply by Country/Region 1,117 3,75 18,55 U.S. Potash Price Forecast (FOB Midwest Wholesale - $/ton) High End 5,58 5,797 5,895 Canada East Europe Western Europe China Middle East Latin America USA Other Expected Low End 16,918 Source: Glen Buckley, NPK Fertilizer & Advisory Service, Nov Source: Bryce Knorr, FarmFutures.com ( Extension Forage Agronomist 5

6 Summary Soil fertility is an investment. You get out of it what you put into it. Fertilizer prices in 216 and beyond appear to be heading downward Increasing capacity:supply cannot continue Now is the time to build soil fertility Resources Long-term prospects appear positive U.S. Energy policy and LNG exploration? P supply is dwindling Industry consolidation and political upheaval are risks USDA Economic Research Service ( FertilizerUse/). Questions? Extension Forage Agronomist 6