Ballooning Fertilizer Prices and Production Cost Considerations Gain Scrutiny • Farm Policy News


Bloomberg writers Kim Chipman and Elizabeth Elkin reported late last week that, “Skyrocketing fertilizer prices could lead U.S. corn profits to drop by about a quarter next year, potentially motivating farmers to shift millions of acres into less cost-intensive soybeans.

“Fertilizer Price Shock Threatens to Slash U.S. Corn Profits,” by Kim Chipman and Elizabeth Elkin. Bloomberg News (October 21, 2021).

“That’s according to Terry Roggensack, agriculture specialist and co-owner of the Hightower Report. He predicts corn returns on an operating-cost basis for producers in the U.S., the world’s biggest producer, could plummet to roughly $430 an acre. That compares with about $600 this year. The yellow grain uses more fertilizer than other crops like soybeans and wheat.”

The Bloomberg article indicated that, “Farmers could find it more attractive to plant soybeans, with operating-cost returns for the oilseed pinned at $500 an acre, according to Roggensack.”

“Current 2022 estimates of non-land costs for high-productivity farmland in central Illinois are $677 per acre for corn and $413 per acre for soybeans. The $677 per acre estimate for corn is $70 higher than the $607 cost for 2021. The $413 estimate for soybeans is $42 per acre higher than the $371 cost for 2020.”  (Schnitkey, G., C. Zulauf, K. Swanson and N. Paulson. “2022 Planting Decisions, Nitrogen Fertilizer Prices, and Corn and Soybean Prices.” farmdoc daily (11):145, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, October 19, 2021).

Also last week, Bryan Doherty reported at Successful Farming Online that, “Skyrocketing fertilizer prices and expectations for increased soybean acreage in the year ahead could create a significant change in the price ratio of corn to soybeans.”

Illinois Production Cost Report (Bi-weekly). USDA- Agricultural Marketing Service (October 21, 2021, https://bit.ly/3Eenh8K).

The article added that, “Now we see fertilizer prices skyrocketing, and a bigger concern could be availability. ”

“Both corn and natural gas prices have increased, indicating that fertilizer prices likely will increase.”  Schnitkey, G., C. Zulauf, K. Swanson and N. Paulson. “2022 Planting Decisions, Nitrogen Fertilizer Prices, and Corn and Soybean Prices.” farmdoc daily (11):145, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, October 19, 2021.

More broadly with respect to fertilizer prices, Bloomberg writers Randy Thanthong-Knight and Jasmine Ng reported on Friday that, “Rice, the staple food for half of humanity, is set to become more expensive because of a blistering rally in fertilizer prices.”

The Bloomberg article explained that, “Global fertilizers costs have rocketed to records on a perfect storm of events — from extreme weather and plant shutdowns to government sanctions. The energy crises in Europe and China are exacerbating the impact as coal and natural gas are important feedstocks. The cost increase comes at a worrying time, with international food prices at a decade high.

China is also stepping up scrutiny on its fertilizer industry, including imposing new hurdles for exporters in a bid to protect domestic supplies.”

Other costs are also on the rise, including diesel fuel (see below) and propane.

Des Moines Register writer Donnelle Eller reported on Saturday that, “Propane prices in Iowa averaged $2.03 per gallon last week, 84% higher than the same time a year earlier, Energy Information Administration data show.

“Prices could climb to around $3 per gallon this winter, said Jay Christie, past president of the Iowa Propane Gas Association board of directors.”

Meanwhile, Alan Bjerga, a spokesman for the National Milk Producers Federation, was quoted in a FoxBusiness News article last week as saying:

‘If you are a dairy farmer anywhere in the country you are seeing increases in everything you need to produce milk.’

Nonetheless, in the context of net returns, the price of some agricultural commodities are robust.

Bloomberg writers Kim Chipman and Megan Durisin reported last week that, “Spring wheat surged to $10 a bushel for the first time since 2012 as hot and dry crop conditions from North America’s prairies to Russia’s Urals leaves the world short on grain used to make everything from croissants to pizza crusts.

‘Wheat Hits New Highs as World Appetite Grows and Supply Shrinks,” by Kim Chipman and Megan Durisin. Bloomberg News (October 22, 2021).

“Prices climbed for the sixth straight week, the longest run of gains in more than two years, as a global appetite grows for wheat of all types. The U.S. expects overall grain stockpiles to end the season at a five-year low. The scarcity is boosting demand for hard red winter wheat, which was more abundant this year than other varieties. Those futures soared to a seven-year high.”

Also last week, Bloomberg writers Jen Skerritt and Kim Chipman reported that, “Durum prices in the western Canadian province of Alberta have risen more than 60% since August and are currently trading near the highest since at least 2015, according to data from Farmers Advanced Risk Management Co. in Winnipeg.”

“Your Bowl of Pasta Is Getting More Expensive as Drought Zaps Wheat Fields,” by Jen Skerritt and Kim Chipman. Bloomberg News (October 22, 2021).

The Bloomberg article stated that, “In North Dakota, the U.S. Midwest state that grows about 80% of the nation’s crop, prices at grain elevators have nearly doubled since June, [Jim Meyer, president of St. Louis-based Italgrani USA, North America’s largest semolina and durum flour miller] said.”



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