“It’s dramatically increased:” Fertilizer costs pain producers

RAPID CITY, S.D. — Fertilizer is a critical component in agricultural production. According to the U.S. Department of Agriculture, fertilizer makes up 36% of a farmer’s operating costs for corn and 35% for wheat, on average.

Screenshot 2022 04 18 130121

statistics courtesy: U.S. Department of Agriculture Economic Research Service

In many places, it’s becoming harder to find and more expensive when you do.

U.S. farmers typically use three forms of nitrogen fertilizers: anhydrous ammonia, urea, and liquid nitrogen. The USDA’s Economic Research Service estimates that in 2022 the price of anhydrous ammonia will increase by 235%, urea by 149%, and liquid nitrogen by 192%.

“It’s dramatically increased,” says Anthony Bly, a soils field specialist with South Dakota State University’s Extension Office. “You know, we have, say urea going from four…four-fifty a ton to eight-fifty and nine-fifty a ton, and so it’s clearly a double…if not maybe more in some locations.”

Agriculture is South Dakota’s number one industry, and while the states farmers aren’t necessarily having difficulty finding fertilizer, the cost increase is noticeable.

According to the U.S. government’s Federal Register, the price of nitrogen fertilizer jumped 95% in 2021, likely due to high transportation costs and supply chain issues brought on by the COVID-19 pandemic.

Another factor? The cost of natural gas.

Natural gas plays a major role in the production of nitrogen fertilizer, and its price increased due to weather and coal production in 2021. The major winter storm in Texas and Oklahoma in February 2021 dramatically increased energy consumption and severely disrupted energy production. Prices then continued to climb as demand outpaced supply.

Screenshot 2022 04 18 124737

statistics courtesy: U.S. Energy Information Administration

Coal stockpiles at power plants across the United States reached a new low in the fall of 2021, dropping to only 80 million tons in September – the lowest level of any month since March 1978, contributing to a higher reliance on natural gas.

Screenshot 2022 04 18 125126

statistics courtesy: U.S. Energy Information Administration

The conflict between Russia and Ukraine is also playing a role. According to the United Nations Food and Agriculture Organization, Russia was the number one exporter of nitrogen fertilizer in 2021, and the number two exporter of potassic and phosphorus fertilizers.

“I think the price is the bigger issue and supply could become the bigger issue this fall or next year, because it’s a complicated pipeline,” Bly says. “You’ve got to put product in that pipeline months in advance of it getting to its final destination.”

Bly says don’t be anxious, but be educated – and prepared.

“It’s so important to know what it costs your farm to produce a bushel of wheat or a bushel of corn, or whatever you’re producing, and then what part of those production costs is fertilizer,” Bly says. “If you know those things and you’re still profitable, you can make better decisions.”

Screenshot 2022 04 18 131501

statistics courtesy: USDA Agricultural Marketing Service

While the trickle-down to consumers is a lengthy process, if the increases continue, it’ll likely be felt in the supermarket.

“Farmers always know that once prices go up, they rarely come down or they come down very slowly,” Bly adds. “I think consumers know that as well.”

Producers: Are rising costs or fertilizer shortages affecting you? We’d love to hear from you! Email: dnelson@newscenter1.com

Categories: ConnectCenter1-Ag, Local News, South Dakota News