TERRE HAUTE – The soaring price of fertilizer is yet another challenge Hoosier farmers face approaching the 2022 planting season next month as Russia’s invasion of Ukraine rumbles through markets worldwide.
For now, some farm experts say higher commodity prices for corn and soybeans will allow farmers to absorb higher fertilizer costs, keeping immediate prices stable at the grocery store. But in farming, there are many challenges, and commodity prices and supply issues are bound to hit grocery stores this year.
“Particularly for wheat,” said Bob White, director of national government relations for the Indiana Farm Bureau, as wheat is a widespread commodity used by food processing companies, “and the price will go up at the grocery store.
“The higher price for corn, soybeans or wheat … as those prices go up, the food [processing] companies will have to pass along those input price increases to the consumer. When this will level off, I am not sure. It is as chaotic for the food companies as it is for the farmers that grow,” White said.
Fertilizer helps maintain crop yields, as Indiana ranks No. 5 nationally in the production of corn and soybeans, White said.
For fertilizer, farmers track nitrogen, phosphorous and potassium costs.
Prices went up in 2021 when domestic nitrogen plants along the Mississippi River were damaged in a hurricane, temporarily slowing production and driving up prices, White said.
Scott Gerit, an economist for the St.Louis-based American Soybean Association, said fertilizer prices also increased last year due to an increase in demand, as more acreage was planted compared to 2019 and 2020 due to weather conditions. Additionally, fertilizer prices jumped further on the heels of the U.S. International Trade Commission tariffs on Russia and Belarus, eliminating U.S. phosphate imports starting in the later half of 2020. “That tariff is still going on and [the U.S.] is in the process of putting tariffs on for UAN as well,” Gerit said. UAN is a solution of urea and ammonium nitrate in water used as a fertilizer.
Fertilizer prices increased again with the Russia/Ukraine war, and commodity prices recently shot up out of concern over a rail strike in Canada on Sunday, Gerit said.
The U.S. imports 86% of its potash from Canada, largely by rail, according to the Virginia-based Fertilizer Institute. Potash is a potassium-based fertilizer.
However, that strike turned out to be short-lived. Railroad workers agreed to arbitration on Tuesday, but it could take weeks before matters are settled on Canada’s second-largest railway with a union that represents 3,000 conductors, engineers, train and yard workers.
Looking ahead, Brad Burbrink, an owner in BE N AG Family Farm in southeast Vigo County, said he applied dry phosphate and potash on fields
in the fall. “Normally we would put that on in the spring, but a lot was done for this year in the fall due to the fear of not being able to get (fertilizers) come spring,” Burbrink said.
“This will help take the fear factor away of not getting it this year. We were able to buy it before the war (by Russia) started, but definitely, our fertilizer prices are up across the board and higher than in the past,” Burbrink said.
Looking at 2022, Burbrink said as long as prices for corn and soybeans remain high, and the farm gets an average to above-average yield, this year still has the potential to be profitable.
“I think with corn and soybean prices where they are at today, I think we have the potential for a good year — but that is all determined on the weather and the yields we get come harvest. We have a lot laying out there as far as from a risk standpoint,” he said.
“We are hoping for good yields. We need to have at least an average yield just to break even,” Burbrink said. Corn prices at the end of last week hit $7.41 per bushel for corn, while soybeans hit $16.68 per bushel. Those higher commodity prices are needed to offset the higher cost of fertilizer, Burbrink said.
“It was about $650 a ton for (phosphorus and potassium) in November,” Burbrink said, with prices now hitting $829 a ton. “We were used to paying about $200 a ton three years ago, so that is the killer, to go from that to more than $700 a ton. That is tough.” And nitrogen costs are even higher. “Nitrogen went from $500 a ton last year and this year it is $1,500 a ton, so that is a big deal,” he said.
Farm practices can mitigate some higher costs of fertilizers. James J. Camberato, professor of agronomy at Purdue University, said farmers have been encouraged to build up their soil with phosphorous and potassium to “an adequate level and then maintain it. Those yearly applications are not designed to increase yield, but to maintain the soil levels.
“I think 75% of the land (in Indiana) will have adequate phosphorous and potassium levels and not applying more this year would have no impact on yield,” he said. “That is actually the objective of that approach to fertilization, that in years where fertilizer is expensive or (crop) prices are low or fertilizer is unavailable or the weather makes it difficult to make applications, the soil has enough that you can skip a year or two,” Camberato said.
“I think most farmers will actually make more money this year, even if they can’t get potassium and phosphorous, if they have adequate soil levels,” Camberato said.
White said the majority of nitrogen for U.S. farmers is produced domestically, and the majority of potash is imported, largely from Canada. Of imports, 6 percent of the supply is imported from Russia and 6 percent from Belarus, White said.
Nitrogen costs can impact corn production, Camberato said, “as essentially none of our (Indiana) soils have enough for maximum yields. In fact, on average, if we don’t add any nitrogen, we make about 60 percent maximum yield, so we have about a 40 percent yield reduction,” Camberato said. “That is where the problems are going to come if nitrogen becomes even more expensive.”
In that event, Camberato said many farmers, intending to plant corn, would switch to “planting soybeans for sure.”
Looking at 2022, Camberato said the “cost of everything is higher” and supplies are uncertain.
“I think it is chaotic and there is a tremendous amount of uncertainty,” Camberato said.