Farmers are feeling the sting of skyrocketing fertilizer prices as they make fall applications, and those prices may not cool anytime soon.
Higher grain prices are just a part of the cause; the rest is a rare combination of supply chain issues that have tightened supplies.
Josh Linville, director of fertilizer for Stone X Financial Inc. based in Kansas City, Missouri, said fertilizer prices were higher in 2008, but the 2021 issue is an unprecedented global shortage.
“This is vastly different,” he said. “Because it doesn’t matter what you’re willing to pay, you can’t get the product.”
“Ammonia up again probably $300 a ton in cost from where it was a year ago," said Bob Larson, marketing manager with Nutrien Ag Solutions. "In season, this late stuff that you bought probably, say, upwards of even $500 to $600 on these last tons they were buying in the marketplace today.”
The DTN National Fertilizer Index shows average retail prices nationally as of Nov. 4 were at $982 per ton for anhydrous versus $423 the last week in October 2020. The retail price of urea was $751 per ton compared to $358 last year.
On a wholesale basis, some of the same products have doubled, tripled, sometimes quadrupled, according to Linville. Those fertilizer prices are quoted in the landed New Orleans, Louisiana, market, the main entry point for fertilizer. He said a year ago, urea barges were $180 per ton in the Gulf of Mexico.
“As of this morning, a barge traded for February at $735 per ton," he said on Oct. 29. "That’s quadrupled.”
He said liquid urea-ammonium nitrate (UAN) fertilizer was running at $120 per ton a year ago. As of Nov. 3, it was $552 per ton, a new record high.
Jeff Thompson, who farms near Colton, South Dakota, was only applying phosphorus and potassium this fall but felt sticker shock when comparing those prices to 12 months ago.
“I think some of them are up, you know, $200 to $300 a ton more, so you know it gets your attention a little bit,” he said.
However, Larson said those prices were at 15-year lows last year.
“I mean there is a price increase, but the value last year on potash and phosphate was really good. But definitely up $200 to $300 a ton,” he said.
Tight supply in the fall, tighter in the spring?
Perhaps even more troubling is the supplies of fertilizer are tight now and expected to get even tighter in the spring. That has prompted more farmers to make fall applications and also has increased demand.
“Availability could be an issue too so I think everybody is probably put on as much as we can this fall and get that taken care of and see how next spring plays out,” Thompson said.
“It’s going to get tight later this fall," Larson said. "You know the weather is going to be a big thing. We’ve got about a third of our fertilizer on for the fall, and of course that’s the easy one, but the last 20% supplies could get tight. Really, all product lines will get tight, which then means the system is empty.”
That situation may not get much better by spring.
“Spring is really only three to four months away, right? River is freezing, you know logistics of either rail unit trains or trucks, and so to fill the pipeline up up here in the Midwest in the wintertime is difficult; there’s just not the transportation,” Larson said.
The China impact
Linville said that includes China’s ban on phosphate and urea exports until June 2022. China has slowed or stopped production at many of its fertilizer plants to conserve electricity and due to rolling blackouts.
China is the largest exporter of urea nitrogen fertilizer, accounting for nearly a third of the global supply and is also a major manufacturer of phosphate. They produce 2.6 million metric tons per year. So, for every 30-day period that China does not export nitrogen, the world loses 380,000 tons.
While Linville said the U.S. buys very little directly from China, when China cuts off exports, the whole globe feels the pressure. The U.S. originally expected to see 5 million tons of nitrogen imported into the U.S. for the 2022 growing season and usually gets about 50% of its nitrogen from the Persian Gulf.
Natural gas and logistical issues
Larson said production has also slowed with seven-year highs in natural gas prices in the U.S. European prices have gone up even further.
“Where you get into Europe, that one there is up to $25 per BTU or metric BTU, so where the nitrogen gets made around the world, natural gas prices are high all around,” Larson said.
Fertilizer prices could continue to climb in the spring, dependent on natural gas prices, he said.
Larson said the biggest issue is the damage from Hurricane Ida, a Category 4 hurricane that made landfall on Aug. 29, 2021. It was the second most damaging on record in Louisiana, next to Hurricane Katrina in 2005. This created a shortage of barges and interrupted nitrogen processing plants.
“The barges could not get unloaded with grain down there in New Orleans, and so when the barges did not get unloaded on grain because of their facilities, we ended up you can’t put fertilizer back on these barges and get them back up north filled up for this fall run," he said. "So there definitely was a catastrophe.”
Linville added that there has also been a shortage of railcars as workers have refused to comply with vaccine mandates. Plus, trucking companies are running out of bulk-load hoppers due to demand for Amazon flat beds and other purposes, and they have a lack of truck drivers.
Forcing planting decisions
“I think corn market has to go up if it’s going to offset that higher fertilizer prices or there will be more beans planted next year, too, because the fertilizer prices will just limit, I think, the production on the corn side,” said Arlington, South Dakota, farmer Craig Converse.
Lake Norden, South Dakota, farmer Doug Noem said the cost of production for corn was around $600 per acre in 2020.
“That’s going to be around $800 (in 2022) due to higher input costs, mostly fertilizer. That and the availability issues may mean fewer acres of corn,” he said.
Farmers need to work with their retailer as soon as possible to assure fertilizer supplies for the spring and fall. Linville thinks farmers who communicate early with suppliers won’t have major issues for planting in 2022, but the ones who wait until the last minute might just be out of luck. He said they should know by January 2022 what kind of inventory there will be for spring.
Larson said they are working with farmers on ways to manage the high fertilizer prices, including split applying some nitrogen, foliar feeding in season and use of nitrogen stabilizers. Farmers should also do grid soil sampling and run a soil test to determine the exact nutrients the crop needs, and if possible, use variable rate applications.