Soaring fertilizer costs are pushing farmers to change planting plans and raise prices
Fertilizer prices have more than doubled in the past year, frustrating U.S. farmers, who are now adjusting spring planting plans and warning of the possibility of higher food prices.
A global shortage of chemical ingredients used to make fertilizers, widely applied to the soil to increase corn and wheat yields, has pushed up fertilizer prices. Escalating costs are leading some farmers to move acres to less fertilizer-intensive crops, like soybeans, while others have said they plan to reduce their overall fertilizer use, which could reduce harvests. futures.
The decline in grain production could translate into higher prices for agricultural products like corn, analysts and farmers said. They added that higher costs for these products would further inflate the prices of staple foods like grains and cooking oil, as well as beef and other meats, as producers rely heavily on grains to feed livestock. and poultry.
“It’s stressful,” said Sean Elliot, a sixth generation farmer from Iroquois County, Illinois. “Guys are definitely cutting back. Mr Elliot said he plans to grow more soybeans in 2022 instead of betting trying to plant his regular corn crops with less nitrogen fertilizer.
Inflation throughout the supply chain results in higher prices for many products and supplies in various industries, including food. US inflation hit a nearly four-decade high in November. Fertilizers are typically one of the biggest expenses farmers have each year, and higher prices threaten what has been a record year for many producers.
The US Department of Agriculture predicts a sharp rise in agricultural commodity prices to bring the net income of US farms to nearly $ 117 billion this year, up 23% from 2020 and the highest in eight year. Corn futures closed at around $ 5.86 a bushel on Wednesday, and soybeans at over $ 12.62 a bushel. At the same time last year, corn prices were around $ 4.25 a bushel, while soybeans were above $ 11.80 a bushel.
Rising fertilizer costs are in part fueled by high prices for natural gas, a key ingredient for nitrogen-based fertilizers, as well as severe storms in the United States that have disrupted more fertilizer factories. early this year and a move by China this summer to ban exports of phosphate, a major component of fertilizers. Some farmers also blame the fertilizer companies for the rising prices.
The price of phosphorus-based fertilizers ranges from around $ 830 to $ 920 per tonne, up from $ 450 to $ 500 per tonne at the same time last year, according to agricultural research firm DTN. Anhydrous ammonia, which helps convert nitrogen into a form usable for plants, is valued at more than $ 1,300 per tonne, up 18% last month and a record high, DTN said. Other popular forms of fertilizer, such as potash and urea, cost more than double what they cost last year, according to DTN.
John Dittrich, who grows about 4,000 acres of corn and soybeans outside of Tilden, New Brunswick, said he was paying more than three times the price of nitrogen fertilizers compared to last year.
“Your suppliers don’t even offer quotes, often,” he said. “I’m not even sure I can get a prize today.”
The potential for lower fertilizer costs in maize and other crop production could fuel continued food price inflation. Food costs have already risen this year as companies passed on higher labor, transportation and packaging costs. “This high price of corn will drive up food prices down the road,” said Dan Basse, president of agricultural research firm AgResource Co.
Some farmers accused the fertilizer companies of artificially raising prices. The Family Farm Action Alliance, a group of more than 6,000 farmers and rural members, last week called on the Justice Department to investigate potential market manipulation by fertilizer companies, alleging the companies have increased prices after seeing crop prices and farmers’ incomes rise this year.
The fertilizer companies dismissed the charges, blaming instead on reduced exports, production problems caused by inclement weather at the start of the year and strong global demand for nutrients for crops. Global supply and demand dynamics determine fertilizer prices, relative to corporate preferences, said Ben Pratt, senior vice president of government and public affairs at Mosaic Co., one of the world’s largest manufacturers. fertilizer to the world.
“These are not companies where you can turn the tap on and off,” said Richard Reavey, spokesperson for fertilizer company Nutrien Ltd. He said the company plans to increase production in 2022. “Everyone is concerned about where we are at in the world with inventories,” he said.
Rising prices help increase the profits of fertilizer companies. Mosaic reported a gain of $ 371.9 million for the three months ended September 30, bouncing off losses for that period over the previous two years. Nutrien reported a profit of $ 726 million in its most recent quarter, compared to a loss in 2020 and less profit in 2019. CF Industries Holdings Inc.
said it raised part of its financial forecast for 2021 last week amid rising demand and rising prices.
It may not be easy for farmers to avoid higher fertilizer bills, analysts and farmers said.
Kenneth Zuckerberg, chief grain and farm supply analyst at farm lender CoBank, said many farmers are stuck in planting plans for next year and current prices could still make corn more profitable than soybeans, even with higher fertilizer costs.
Mark McHargue, a fourth-generation farmer in Central City, Nebraska, and president of the Nebraska Farm Bureau, said he plans to apply the lower end of the recommended fertilizer use for his corn crops year round. next. He expects other farmers to make similar decisions, especially when corn prices are high.
“As long as the value is there, they can’t switch to soy,” he said. “They can spread this fertilizer further, but they might shorten the harvest a bit.”
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