Too Many to Count: Factors Driving Fertilizer Prices Higher and Higher

Among farmers and ranchers, very few topics are being discussed as much as the skyrocketing cost of fertilizer and increasing concerns regarding availability. Given that fertilizer costs account for approximately 15% of total cash costs in the U.S., fertilizer prices are the number one issue on farmers’ minds as they begin to set up purchases for the 2022 growing season. Unfortunately, the fertilizer sticker price farmers in some areas are reporting is up more than 300% and delivery times are anyone’s best guess. We’ve seen this before, in 2008. During the 12 months ending in April 2008, nitrogen prices increased 32%, phosphate prices increased 93% and potash prices increased 100%. Prices remained there through 2009, then dropped, ultimately returning to pre-2007 levels by the end of 2009. That price surge was associated with strong domestic and global demand, low fertilizer inventories and the inability of the U.S. fertilizer industry to adjust production levels. This time around, those same factors are at play, along with several others that add an extra layer of uncertainty.

This article dives into a number of the short- and long-run factors impacting fertilizer supply and demand to provide context to the increasingly expensive production input.

All major nutrients used in the production of primary row crops in the U.S., nitrogen (in the forms of anhydrous ammonia, urea, or liquid nitrogen), phosphorus (diammonium phosphate – DAP and monoammonium phosphate – MAP) and potassium (potash), have experienced varying degrees of upward price pressure. Compared to September 2020 prices, ammonia has increased over 210%, liquid nitrogen has increased over 159%, urea is up 155%, and MAP has increased 125%, while DAP is up over 100% and potash has risen above 134%.

Looking at the average price of each nutrient since September 2008, as collected in the Illinois cost of production dataset, anhydrous ammonia is up 118