What is going on with fertilizer prices?

Over the past year, farmers have watched fertilizer prices climb with little to no hope for a price break on the horizon. Urea fertilizer cost Matt Miles—a corn, soybean, rice, and cotton farmer in Arkansas—$400 per ton for the 2021 growing season. At $1,100 per ton, Miles faces a 175% price increase for the 2022 growing season. Growing corn in 2022 will cost him an additional $180 an acre in fertilizer alone, compared with 2021.

The skyrocketing fertilizer market has made planning difficult. Producers are now faced with more issues to consider on top of the decisions they already make in a regular planting season. They must ask themselves what is the most cost-efficient crop going to be? Farmers must weigh the pros and cons of acquiring manure vs. buying synthetic fertilizer. How should they get the most out of the fertilizer they do spend their money on?

As the industry looks ahead to the 2022 growing season, farmers, analysts, and fertilizer companies have their own perspectives on what’s happening in the market.

Many factors influence fertilizer availability and price

“Global fertilizer prices have reached record highs this year, in part due to soaring prices for the natural gas used to produce them, and severe storms in the United States that disrupted production,” according to a December 9 Reuters article.

Though it may seem to the outside observer there is a domestic supply shortage that is driving up the price of fertilizer, Kreg Ruhl, senior market manager at Growmark—an agricultural supply cooperative based in Illinois—doesn’t think that is the root of the problem. There is fertilizer in the United States; it is expensive primarily due to the fluctuation of the world energy market, which influences prices, he says. Ruhl believes fertilizer will remain expensive until that market evens out.

Prices on all inputs, not just fertilizer, are at record highs, climbing a historic average of at least 12% across commodities, according to Purdue University researcher and Ag Economy Barometer author Michael Langemeier. He says some input prices are much more variable over time than others. The nitrogen sources used in fertilizer are tied to oil prices, and the more volatile the oil market is, the more the price of fertilizer will fluctuate. 

A monthly poll conducted by Langemeier and fellow researcher James Mintert, the Ag Economy Barometer asks farmers to select from a pre-existing range of percentages and estimate how much they predict all commodity input prices will increase in the upcoming year. 

In September, one-third of producers surveyed placed commodity input prices in the highest available percentage range, which, at the time, was “10% or more.” 

A higher range option of “12% or more” was added to the survey in November due to the over 120% increase in the price of fertilizer, which skewed farmers’ average input increases to record highs. At the time, over half of respondents put price estimates in the “12% or more” range.

“Although much of the attention on increasing input costs has focused on this year’s dramatic rise in fertilizer prices, virtually all other input costs ranging from farm machinery to seed and fuel are on the upswing as well,” says the Ag Economy Barometer. 

As fertilizer prices continue to increase into the 2022 production year, the Ag Economy Barometer plans to add a “15% or more” choice indefinitely when farmers evaluate the estimated prices of commodity-wide input increases.

Fertilizer prices put pressure on the 2022 markets

The increased expense of nitrogen fertilizer will have effects on the 2022 corn market. As it becomes more expensive for producers to grow corn, farmers may begin to contemplate whether it is more cost-efficient to change their crop rotation. Production costs top the list of factors to consider, says Patrick Quaid, R.J. O’Brien & Associates commodities trader. 

On one hand, if farmers decide to alter their usual rotation for 2022, they may switch to a crop that requires less nitrogen fertilizer, like soybeans. On the other hand, farmers also have to consider that if all producers switch to soybeans, then corn prices may rise with demand, perhaps enough to outweigh the cost of fertilizer.

“From 2000 to 2021, differences in fertilizer costs account for 48% of the difference in corn-minus-soybean expenses,” according to “2022 Planting Decisions, Nitrogen Fertilizer Prices, and Corn and Soybean Prices,” a study conducted by agricultural economists at the University of Illinois. “The 2022 estimate is 49%. Changes in phosphate and potash prices — two other major fertilizer nutrients — are used more proportionally across corn and soybean acres. As a result, changes in nitrogen fertilizer prices have the most significant effect on the relative profitability of corn and soybeans.”

Analysts talk short- and long-term effects of high fertilizer prices

While farmers are concerned about fertilizer prices in the short-term, the rapidly increasing prices may have rippling long-term effects on the supply chain. As farmers across the world begin to consider modifying their usual crop rotation, export prices and trading patterns may drastically change, as well as the labor and materials needed to facilitate importing and exporting.

Analyst Brian Doherty says around October is when producers can begin negotiations with their suppliers to prepare for the next season. In some cases, those negotiations have been able to happen, but in others, suppliers have been unable to promise a price or a time for delivery.

Farmers seek nutrient solutions for the next planting season

What is a good, full-nutrient alternative to synthetic fertilizer? The answer for some is a return to the original fertilizer: manure. Not only can manure provide crops the nutrients they need to grow, but if they are selected properly, manure can restore and build soil health.

“It’s natural vs. synthetic fertilizers,” says Dan Luepkes, a corn farmer in Oregon, Illinois. “Natural fertilizers have no added salt, so they’re more usable for the plant. Chicken manure also contains some additional micronutrients and calcium that you won’t get in synthetic fertilizers unless you buy all those additional micronutrients.”

Daniel Andersen, an associate professor at Iowa State University, says using the right type of manure can also bolster soil health. While it is convenient to use manure from your own barnyard, conducting soil tests to see what is lacking and then finding the right manure to meet those needs can improve the microbiology of your soil. This makes for better cropland, something synthetic fertilizer doesn’t do without additives, he says.

Optimizing the nutrients on hand with technology

Once a farmer has secured fertilizer, using it to its fullest potential is imperative to getting his money’s worth. Variable-rate technology allows producers to optimize the spreading and application of fertilizer in specific zones, ensuring less is wasted. 

“Automatic zone creation gives growers a much higher level of flexibility and accuracy to optimize inputs,” says Matthew Lau global product manager of scripting for The Climate Corp. “It also allows growers to test different layers and different hypotheses and compare those to determine which one they feel is going to be the best choice to move into that next season. We know every year is different, and every year brings its own set of challenges.”

Farmers urge government action

In an effort to find a solution to the rapidly increasing price of fertilizer, a group of 6,000 farmers, called the Family Farm Action Alliance, petitioned the U.S. Department of Justice to see if there is a connection between the increases and manipulation by fertilizer companies. Currently, fertilizer companies like Mosaic are denying any manipulation of the markets, pointing to factors in the global economy as the source of the price increase.

“There’s a potential in the way this industry is structured to really exploit farmers,” says Philip Howard, associate professor at Michigan State University and expert on food industry consolidation.

Previous Jones Lang LaSalle Incorporated: San Diego area mall sells for $ 23.5 million
Next Lowest gasoline price in the world