The Wall Street Journal | Surging Fertilizer Costs Push Farmers to Shift Planting Plans, Raise Prices

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Fertilizer prices have more than doubled over the past year, frustrating U.S. farmers, who now are adjusting spring planting plans and warning about the potential for higher food prices.

A global shortage of the chemical ingredients used to make fertilizer, widely applied to soil to boost corn and wheat yields, has sent fertilizer prices soaring. Escalating costs are leading some farmers to shift acres toward less fertilizer-intensive crops, like soybeans, while others said they plan to cut back on their overall fertilizer use, potentially reducing future harvests.

Lower grain production could translate to higher prices for farm commodities like corn, analysts and farmers said. They added that higher costs for such commodities would further inflate prices of pantry staples like cereal and cooking oil, as well as beef and other meat, because producers rely heavily on grain to feed livestock and poultry.

“It’s stressful,” said Sean Elliot, a sixth-generation farmer in Iroquois County, Ill. “Guys are definitely cutting back.” Mr. Elliot said he plans to grow more soybeansin 2022 instead of gambling on trying to plant his usual corn crops with less nitrogen fertilizer.

Inflation throughout the supply chain is leading to higher prices for many products and supplies in a variety of industries, including food. U.S. inflation reached a nearly four-decade high in November. Fertilizer is typically among farmers’ biggest expenses each year, and higher prices threaten what has been a banner year for many growers.

A broad rally in agricultural commodity prices is projected by the U.S. Department of Agriculture to drive U.S. farms’ net income to nearly $117 billion this year, up 23% from 2020 and the highest in eight years. Corn futures closed trading Wednesday at roughly $5.86 a bushel, with soybeans at over $12.62 a bushel. At this time last year, corn prices were at roughly $4.25 a bushel, while soybeans were over $11.80 a bushel.

The rise in fertilizer costs is partly fueled by elevated natural gas prices, a key ingredient for nitrogen-based fertilizers, as well as by severe storms in the U.S. that disrupted fertilizer plants earlier this year and a move by China this summer to ban exports of phosphate, a major fertilizer component. Some farmers also blame fertilizer companies for the rising prices.

The price of phosphorus-based fertilizers ranges between roughly $830 to $920 a ton, up from between $450 and $500 a ton at this time last year, according to agricultural research firm DTN. Anhydrous ammonia, which helps convert nitrogen into a form usable for plants, is assessed at more than $1,300 a ton, up 18% in the past month and an all-time high, DTN said. Other popular forms of fertilizer, such as potash and urea, are more than double what they cost last year, according to DTN.

John Dittrich, who farms approximately 4,000 acres of corn and soybeans outside of Tilden, Neb., said he is paying more than triple the price for nitrogen fertilizer compared with last year.

“Your suppliers aren’t even offering quotes, often,” he said. “I’m not even sure I could get a price today.”

The potential for higher fertilizer costs to cut into production of corn and other crops could fuel continued food-price inflation. Food costs have already climbed this year as companies have passed along higher labor, transport and packaging costs. “That high corn price will feed into higher food prices down the road,” said Dan Basse, president of Chicago-based agricultural research firm AgResource Co.

Some farmers have accused fertilizer companies of artificially pushing up prices. The Family Farm Action Alliance, a group of more than 6,000 farmers and rural members, last week asked the Justice Department to investigate potential market manipulation by fertilizer companies, alleging that companies have increased prices after seeing crop prices—and farmers’ incomes—rise this year.

Fertilizer companies rejected the accusations, instead blaming curtailed exports, production problems from severe weather earlier this year and strong global demand for crop nutrients. Global supply-and-demand dynamics drive fertilizer prices, versus companies’ preferences, said Ben Pratt, senior vice president of government and public affairs at Mosaic Co., one of the world’s largest fertilizer makers.

“These aren’t businesses where you can turn the tap on and off,’’ said Richard Reavey, a spokesman for fertilizer company Nutrien Ltd. He said the company plans to increase its production in 2022. “Everyone is concerned about where we are globally with inventories,” he said.

As the Federal Reserve and other central banks around the world deal with rising inflation amid the economic recovery from the pandemic, Turkey — where the rate is currently over 20% — offers a warning. Soaring inflation has led to economic turmoil after years of broad growth. Photo: Sedat Suna/EPA/Shutterstock
Rising prices are helping boost fertilizer companies’ profits. Mosaic reported a $371.9 million gain for the three months ended Sept. 30, rebounding from losses for that period in the previous two years. Nutrien reported $726 million in earnings in its most recent quarter, compared with a loss in 2020 and a smaller profit in 2019. CF Industries Holdings Inc. said it raised part of its financial forecast for 2021 last week amid higher demand and rising prices.

It may not be easy for farmers to avoid higher fertilizer bills, analysts and farmers said.

Kenneth Zuckerberg, lead grain and farm-supply analyst with agricultural lender CoBank, said many farmers are locked into planting plans for next year, and current prices may still make corn more profitable than soybeans, even with higher fertilizer expenses.

Mark McHargue, a fourth-generation farmer in Central City, Neb., and president of the Nebraska Farm Bureau, said he plans to apply the lower end of the recommended fertilizer use for his corn crops next year. He expects other farmers to make similar decisions, especially while corn prices are high.

“As long as the value is there, they may not switch to soybeans,” he said. “They may spread that fertilizer farther, but they might risk shortening the crop a little bit.”