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Urea, Natural Gas, and Corn Price Correlations

By Aaron Smith and Chris Boyer

Fertilizer prices have come down from the peak in April 2022 (Figure 1), however fertilizer prices remain elevated compared to 2017 through 2020. In 2021 and 2022, high fertilizer prices coincided with high corn prices, resulting in positive profit margins for many producers, especially those that were not affected by adverse weather. Since August 2022, Henry Hub Natural Gas Prices have declined sharply. Natural gas is a key input in the production of nitrogen fertilizer accounting for 70-90% of variable production costs (Outlaw et al. 2022). Two important questions for many producers are how related are these prices and how does this relationship potentially impact profitability in 2023? To examine this, we look at the historical relationship between corn, urea, and natural gas prices.

Figure 1. Weekly Urea, Natural Gas, and Nearby Corn Futures Price, January 2, 2017, to March 27, 2023

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Nitrogen, natural gas, and corn prices are positively correlated (correlation describes the strength of an association between two variables, positive correlation indicates that prices move in the same direction, negative correlation indicates prices move in opposite directions; correlation coefficients have values between -1 and 1). Examining weekly price data from January 2017 to March 2023, natural gas and urea prices were positively correlated (0.738), natural gas and corn prices were positively correlated (0.668), and urea and nearby corn futures prices were positively correlated (0.906).  All three variables are strongly positively correlated. However, there are event-based anomalies in the data that create temporary deviations in the relationship between prices. For example, natural gas prices briefly spiked in February 2021 during a winter storm that strained natural gas and electricity markets in Texas and Oklahoma (USEIA, 2022). It is also important to note that correlation does not indicate causation. In other words, a higher natural gas or urea price does not necessarily cause higher corn prices, and vice versa.  However, the takeaway from this figure and correlations for natural gas, corn, and urea prices are they tend to move in the same direction. 

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How a Desire to Lead Brought This Wheat Breeder to Canada

Video: How a Desire to Lead Brought This Wheat Breeder to Canada

Gurcharn Singh Brar is a wheat breeder whose path meandered from the breadbaskets of Punjab, India, to the sprawling fields of the Prairies. In a candid conversation, Brar shared insights into his journey, the challenges faced, and the undying passion that fuels his quest for better crops.

It all began with a childhood rooted in the wheat fields of Punjab, where agriculture isn’t just a livelihood but a way of life. His fascination with wheat and its potential led him to pursue a bachelor’s degree in agricultural sciences at Punjab Agricultural University. It was during this time that he encountered the spectre of rust diseases, particularly stripe rust, which plagued the region’s wheat crops. Determined to combat this menace, he set his sights on a journey that would take him across continents.

Venturing abroad for his graduate studies, he found himself in Saskatchewan at the Crop Development Centre (CDC), working under the mentorship of renowned researchers like Randy Kutcher and Pierre Hucl. Here, he delved deep into the world of wheat genetics, focusing on stripe rust resistance — a quest that would shape his academic pursuits for years to come.

After completing his master’s and Ph.D. in six and a half years, he embarked on a professional journey that would see him traverse academia and research. From brief stints as a research officer to landing his dream faculty position at the University of British Columbia’s Plant Science program, his career trajectory was marked by a strong drive to make a difference in the world of wheat.

Despite the allure of British Columbia’s unique agricultural landscape, he found himself wanting to return to the vast expanses of the Prairies, where wheat reigns supreme. He recently returned to the Prairies and is the new wheat breeder at the University of Alberta in Edmonton.

“The opportunity to lead an established wheat breeding program at the University of Alberta was a dream come true. With the necessary resources and infrastructure in place, I’m excited to drive innovation and develop high-yielding wheat varieties tailored to the unique conditions of northern Canada,” he says.

Brar, one of Seed World Canada‘s 2024 Next-Gen Leaders, has become known for identifying novel sources of resistance to priority diseases and his efforts in developing wheat germplasm with multiple disease-resistant traits.

In addition to his groundbreaking research, Brar is committed to mentoring the next generation of agricultural scientists.

“I believe in nurturing talent and empowering students to pursue their passions,” he says. “Watching my students grow and thrive in their research endeavours is hugely rewarding.”

As he looks ahead, Brar’s vision for the future of wheat breeding is clear: “My number one target is to develop high-yielding wheat varieties adapted to the northern climates of Canada. By focusing on early maturity and strong straw traits, we can maximize yield potential while ensuring resilience to environmental challenges.”

His decision to also join the Prairie Recommending Committee for Wheat, Rye, and Triticale (PGDC) executive as member-at-large came from a desire to play an even more important role in the world of Canadian cereals.