(Photo: Iowa Soybean Association)
The culprit behind rising fertilizer prices
December 8, 2022 | Kriss Nelson
Several issues are factoring into the high cost of fertilizer, but one primary culprit is the European natural gas market.
“The European natural gas market continues to pull high prices which are shutting down European production of fertilizer limiting global supplies,” says Chad Hart, Iowa State University, agricultural economist at the Iowa State University Integrated Crop Management Conference held last week.
The United States is also exporting natural gas at record levels, shorting our supply for manufacturing fertilizer.
“We went from basically exporting nothing to now, the export business is cooking because of global replumbing,” says Hart. “We are trying to replumb the global natural gas market, and that is creating the pricing scenario we have right now,” he says.
U.S. producers are not in this alone, however.
“If you are a farmer, you are facing these higher fertilizer costs, no matter where you are on this planet,” says Hart.
One of our biggest competitors, Brazil, Hart says, is experiencing shortages of fertilizer, something U.S. producers have been able to avoid.
“If we think we have shortages, we don’t. We have been able to get product, maybe just not in a timely manner,” says Hart. “There are shortages in South America where they can’t get product at all.”
This is because the United States manufactures 90 percent of our fertilizer.
Hart says South America relies on imports of nitrogen from Europe and Russia.
“Now, Europe has shut off production because of the high natural gas prices, and although Russia is still getting fertilizer to Brazil, it is having to take an indirect route, which is adding to those costs as well,” he says.
Hart says the percentage basis for fertilizer is up three times since 2020; natural gas rose four times in price but has since gone back down to three times, and European natural gas prices went up 18 times their price in the past few years.
“That is an incredible price movement that is throwing everything else off,” he says. “Until that settles down, nothing else can.”
Managing high fertilizer prices
How can producers manage profit margins with higher fertilizer prices?
The economist gave some agronomic advice.
“The idea is, we should be soil testing,” he says. “Soil testing would inform us what we need to apply to those soils. That information could help avoid some higher costs where you can. Where it makes both agronomic and financial sense.”