Fertilizer prices continue to rise for crops

KANSAS CITY, MO. – Fertilizer may have been considered a four letter word by some in the past, but this year that word is HELP due to tight supply and soaring prices. The supplies, or their absence, drive up crop production costs and could have an impact on the areas planted in 2022, in particular for maize with its high fertilizer (nitrogen) requirements and high break-even point.

Several factors have combined to constrain supplies and inflate prices for nitrogen, the main fertilizer applied to ‘herbaceous’ crops such as corn and wheat, as well as other key fertilizers including phosphorus and potassium ( potash). Fertilizer production in the region, responsible for 60% of ammonia (nitrogen) production in the United States, was disrupted last winter by the arctic climate in the south and in late summer by Hurricane Ida. Prices for natural gas, a major input that accounts for about 80% of the variable cost of nitrogen fertilizers, have skyrocketed. The main producing countries have slowed down production and exports. Soaring transportation costs and logistical grunts have compounded the disruption in the fertilizer industry.

Global nitrogen prices in November topped $ 1,000 per tonne for the first time, according to Reuters. The cost of producing a ton of ammonia (a popular form of nitrogen fertilizer) is currently $ 1,000 from $ 110 last summer, said Svein Tore Holsether, CEO of the fertilizer maker Oslo. Norway based Yara International. Fortune magazine on the sidelines of the COP26 climate conference in Glasgow, Scotland. Yara has reduced its ammonia production by 40% since September due to high energy costs.

Holsether and others have warned that high global prices and limited supplies of fertilizer will contribute to rising food price inflation and could lead to global food shortages in the coming year. According to the Food and Agriculture Organization of the United Nations, world food prices hit their highest level in 10 years in October. the Financial Time noted in a recent column that the last time fertilizer prices climbed like this year was in 2008. But the difference this year is parts of global climate policy that has limited the funds available to increase natural gas production, which was the “bailout” of supply. in the past.

Nitrogen fertilizer sales in 2020 were worth $ 53 billion worldwide and are at least 80% higher this year, according to Argus Media. In testimony Nov. 3 at a House Agriculture Committee hearing on “The Immediate Challenges to Our Nation’s Food Supply Chain,” Corey Rosenbusch, President and CEO of the Fertilizer Institute, noted that the situation of fertilizers should be “viewed in a global context.” “

“Almost 44% of all fertilizers produced in the world are exported,” Rosenbusch said. “Moving this material from production facilities to farms requires virtually any mode of transportation. “

The disruptions in countries that are major fertilizer producers, such as Belarus for potash and China for phosphate and nitrogen, are affecting the global fertilizer supply chain even though they are not major suppliers from the United States, he said. China, which accounts for about a third of the world’s supply of nitrogenous urea-based fertilizers, has banned exports of phosphate and urea until June 2022 after cutting or halting production to save electricity .

Farmers in some countries, including India, have turned to the black market in some cases for exorbitantly priced fertilizers, industry reports show. Farmers in the United States are unlikely to turn to the fertilizer black market, but they will certainly be affected.

StoneX recently reported that wholesale prices for anhydrous ammonia nitrogen in the Midwest in October rose about 65% in just over a month. As with most market-related things, there are disagreements over how farmers will react to fertilizer prices. Some expect corn plantings to decline due to its high nitrogen demand. But others note that current high commodity prices, along with limitations in crop rotation schedules, will limit the switch from corn to other crops like soybeans, wheat or cotton. Still others see corn acreage increase in 2022 due to high market prices. Some expect fertilizer supplies to increase and prices to fall in 2022 as the supply chain improves and energy prices stabilize.

Although nitrogen stores appear to be sufficient for the fall application, a time when many farmers choose to apply the fertilizer rather than cramming another path through the fields with soil preparation and planting. in the spring, many producers delayed their purchases due to high prices. At the same time, some sellers of agricultural inputs have limited forward sales of nitrogen fertilizers due to uncertainty over availability and prices in a few months.

The US Department of Agriculture, in its first long-term projections released in early November (to be revised at the Agricultural Outlook Forum in February 2022), forecast 2022 corn seeded area at 92 million acres, down 1.3 million acres from 2021 but up 1.3 million acres. from 2020.

Steve Freed, ADM Investor Services, Inc., Chicago, said he had heard that most farmers will plant their normal crop rotations in 2022, noting that growers are “in pretty good financial shape” after the high prices of this year’s crops. Some predict that the cost per acre to produce corn could rise by a third or more mainly due to high fertilizer prices, assuming farmers can source it.

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