Should You Plan for a More Stable Corn Price?

Stockpiling fertilizer and knowing the markets in and out may pay off in the long run.

Published on: Apr 1, 2013

When Chris Hurt, a Purdue University ag economist, and his cohorts looked ahead through 2016 to do crop budgeting, they assumed that the corn price – which has bounced high and retraced its steps to lower levels over the past six years – might become more stable.

Hurt put the price around $5 to $5.50 per bushel. Another economist felt that $5.50 to $6 would be closer. None of this rules out swings well below or above that level. However, in general, barring unforeseen circumstances, Hurt believes corn settling down around the $5 to $5.50 per bushel mark in the longer term is a good place to start your budgeting process.

If you buy his projection, then how does that affect what you do in planning? One farmer says it means you make sure you can make a profit to support the family and cover machinery costs on lower corn prices than you had last fall. He also says you learn how to use hedges, puts and calls to give you as many marketing tools in your toolbox as possible. This would help you take advantage of what swings there might be in the market.

Stockpile fertilizer: Buying fertilizer when the price is low for application later can work if you have proper, indoor storage for it.
Stockpile fertilizer: Buying fertilizer when the price is low for application later can work if you have proper, indoor storage for it.

The same farmer says he will concentrate on the input side. The goal will be to buy inputs as cheap as possible, and sell corn as high as possible, even if it's not as high as it was in the fall of 2012. One trick to buying inputs at lower prices is to have adequate storage, either for dry or liquid products, so that you can take advantage of what appears to be a bargain price when it occurs.

That may mean having storage tanks for liquid nitrogen. In many states that means having a diking system approved by the regulatory agency in your state that oversees fertilizers. If you don't have a dike, it may mean it's time to consider working it into your capital projects budget. Dikes can either be concrete structures outdoors that contain steel tanks, or buildings with containment walls build inside. Today, many of the tanks that go into those structures are fiberglass.

If you have room for dry storage, you may be able to pick up bargains when there is a glut on the market of a particular fertilizer, say potash. One farmer says he has purchased a two-year supply before when he thought prices justified it. He prefers to apply fertilizer every year, instead of putting on enough for two years at one time, but he likes to have control of it so he knows what the price will be.

In his case he purchased some older buildings a defunct fertilizer business had left behind. There may be similar opportunities in your neighborhood if you look for them.

The bottom line message is don't expect to always have $6 to $7 per bushel corn around to make budgets work.