Impact of Changing Fertilizer Prices on Citrus Production Costs

Ronald P. MuraroUF/IFAS – Citrus RECrpm@crec.ifas.ufl.edu

Presented at 2008 Citrus Expo Seminar

UF/IFAS CREC Lake Alfred, FL

September 04, 2008

Preliminary Production Costs for a 10+ Year Old Southwest Florida Processed Orange Grove

Preliminary 2007-08

Without Greening

Preliminary2007-08

With Greening

$/Acre % of Total $/Acre % of Total

Weed Control & Herbicide Costs 223.32 17.5 223.32 12.5

Spray-Pesticide Costs 182.84 14.3 432.87 24.2

Fertilizer Costs 416.10 32.6 416.10 23.3

Pruning/Topping 37.87 3.0 37.87 2.1

Tree Replacement/Resets 139.00 10.9 261.10 14.6

Irrigation & Ditch Maintenance 278.56 21.8 278.56 15.6

Citrus Greening Management & Canker Decontamination 0.00 0.0 136.00 7.6

Total 1,277.69 100.0 1,785.82 100.0

Increase in Fertilizer Costs for a 10+ Year Old Southwest Florida Processed Orange Grove

Without Citrus Greening Costs

2002-03 2006-07Preliminary

2007-08

$/Acre% of Total $/Acre

% of Total $/Acre

% of Total

Total Production Costs 762.29 100.0 978.75 100.0 1,277.69 100.0

Fertilizer Costs

Material 124.50 16.3 209.32 21.4 385.57 30.2

Application 16.05 2.1 26.28 2.7 30.53 2.4

Total Fertilizer Costs 140.55 18.4 235.60 24.1 416.10 32.6

Change in Production Costs for Southwest Florida Processed Oranges – 2002-03 to 2007-08 –

Without Citrus Greening Costs

31.4% 33.3%

196.1%

35.1% 35.7% 51.3%67.6%

0

50

100

150

200

Weed

Contro

l

Spray-P

estic

ide

Fertiliz

er

Prunin

g/Toppin

g

Tree R

epla

cem

ent/R

eset

s

Irrig

ation &

Ditc

h Main

tenan

ce

Total C

osts

% C

ha

ng

e

Other Than Greening Costs, Fertilizer Is NowThe Largest Cost Component of Operating A Citrus Grove

10+ Year Processed Orange Grove in Southwest Florida –Without Citrus Greening Costs

22.3%

18.0%

18.4%3.7%

13.4%

24.2%

Weed Control and Herbicide CostsSpray-Pesticide CostsFertilizer CostsPruning/ToppingTree Replacement/ResetsIrrigation and Ditch Maintenance

17.5%

14.3%

32.6%

3.0%

10.9%

21.8%

Weed Control and Herbicide CostsSpray-Pesticide CostsFertilizer CostsPruning/ToppingTree Replacement/ResetsIrrigation and Ditch Maintenance

2002-03$762/Acre

Preliminary 2007-08$1,278/Acre

Trends in Florida (U.S.A.) Fertilizer Prices – 1999 to 2008

0

200

400

600

800

1000

1200

1999 2002 2005 2007 2008

Year

$/T

on

Fertilizer - 17-4-17-2.4 Mg Ammonium Nitrate (Dry)

Triple SuperPhosphate Potassium Nitrate/Chloride

Trends in Sao Paulo (Brazil) Fertilizer Prices – 2002 to 2008

0

100

200

300

400

500

600

700

800

900

1000

2002 2005 2007 2008

Year

$/T

on

Fertilizer - 20-0-20 Ammonium Phosphate SuperPhosphate Potassium Chloride

What is Driving Higher Fertilizer -Nutrient Prices

• Increased world demand for fertilizer-nutrients

• The cost of transportation; higher energy costs

• Declining value of the U.S. Dollar

Source: The Fertilizer Institute, Washington, D.C.

Increase in World Demand for Fertilizer Nutrients from 2001 to 2006

Nitrogen 11%

Phosphate 13%

Potassium 17%

China, India and Brazil were largest contributors for world nutrient demand growth.

Source: The Fertilizer Institute, Washington, D.C.

Top Five Fertilizer Nutrient Countries

Consuming Countries

Importing Countries

Nutrient Producing Countries

Exporting Countries

China United States China Russia

India China United States Canada

United States Brazil Russia United States

Brazil India Canada Belarus

Pakistan France India Germany

Source: The Fertilizer Institute, Washington, D.C.

Fertilizer prices are expected toincrease for the 2008-09 season.

What can be done to keep fertilizer Costs down for 2008-09?

1,5001,7001,9002,1002,3002,5002,7002,9003,1003,300

70 100 130 160 190 220 250

Pounds of Nitrogen Per Acre

Pounds Solids Per Acre

Example Processed Orange Production CurvePound Solids Yield Response

to Increasing Nitrogen Fertilization

Example on Reducing the Impact of a 30% Increase in 2008-09 Fertilizer Prices -- Processed Orange Grove

Without Citrus Greening Management Costs

Preliminary2007-08

30% Price Increase with

Normal Fertilization

2008-09

30% Price Increase with

75% Fertilization2008-09

$/Acre% of Total $/Acre

% of Total $/Acre

% of Total

Total Production Costs 1,277.69 100.0 1,401.47 100.0 1,266.50 100.0

Fertilizer Costs

Material 385.57 30.2 509.35 36.3 382.01 30.2

Application 30.53 2.4 30.53 2.2 30.53 2.4

Total Fertilizer Costs 416.10 32.6 539.88 38.5 404.91 32.6

Summary / Conclusion / Comments

Costs of Operating A Florida Citrus Grove Are Increasing Rapidly

________________________________________________________

Major causes of increasing costs

– Fuel/Energy Costs

– Fertilizer Costs

Fertilizer Costs Are Increasing Faster Than Other Caretaking Costs

______________________________________________________

• Increasing World Demand for Fertilizer Nutrients - China, India, Brazil

• Higher Energy Costs

• Higher Transportation Costs

• Indication is fertilizer costs will continue to increase

To Mitigate Expected Increase in 2008-09 Fertilizer Prices

______________________________________________________

• Consider reducing the amount of fertilizer applied

– However, reducing fertilizer applied should

be considered a one year strategy due to the possible negative impact on future yields; i.e. unless current fertilization rate is already above optimum level.

To Mitigate Expected Increase in Future Fertilizer Prices

______________________________________________________

• Consider establishing a fertilizer experiment in your own grove

– Set aside a one or two rows for evaluating different fertilizer application rates

– Using variable rate fertilization equipment, apply

several fertilizer application rates over one or two rows above and below current rates

– Check leave nitrogen, observe condition and color of trees, differences in yields and compare to the trees receiving your traditional fertilizer program

Current Citrus Cost Information Can Be Obtained at

UF/IFAS CREC Website:

www.crec.ifas.ufl.edu/extension/economics