Should You Delay Purchasing Fertlizer for Next Spring?!
Based upon some recent AgWeb articles, it may be a good idea to wait about four to six weeks before making any serious fertilizer decisions for any 2014 spring needs.
Although fertilizer prices have been dropping, Russia’s OAO Urakali (URKA), the world’s largest potash producer recently announced they will be increasing output next year by 24%, which should ultimately put downward price pressures on all three major fertilizer categories, potash, nitrogen and phosphates for 2014 compared to this year. It is hard to say what the ultimate effect of this news will be, however, David Asbridge, President and Senior Economist for NPKFAS a fertilizer advisory service was recently quoted as predicting prices to be 10% to 12% lower.
As many of you know, farmers are allowed to report on the cash basis method of accounting for tax purposes, which makes pre-paying large expenses an effective tax planning tool, and pre-paid fertilizer can be used as an avenue for this. The other tax advantage of fertilizer is the ability to capital these costs and amortize the cost as the fertilizer is consumed.
Because of the uncertainty created in the fertilizer market, Asbridge recommends waiting to book spring needs until at least November/December when dealers could be sitting on higher levels of inventory.
You can find a recent AgWeb article here: Ag Economist: 2013 a Transition Year for Grain Farmers.
Special thanks to David Enquist in our Moses Lake, Washington office for this post.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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