Making money farming is always a risky proposition, but a giant spike in fertilizer prices this year will make it even more difficult.
The cost of phosphate and nitrogen-based fertilizers, the kinds that are applied to corn, soybean and hay fields, are seeing jumps of 80% to 200%.
Manufacturers are blaming a variety of factors for the jump. Raw material prices are up, and natural gas, also used to make fertilizer, is more expensive. Hurricane Ida shut down production in the U.S. last year, while power outages in China cut back manufacturing capacity there.
“Prices are all higher, it’s just crazy,” said Bill Taylor, who farms 2,500 acres of corn and soybeans in central Missouri near Sedalia. “Guys like me are talking about reducing the amount we apply, or maybe delaying to see if prices come down. It’s going to mean lower profits, or not even being able to break even.”
Yet fertilizer company officials say they don't expect the price increase to have much effect on sales.
"Our own belief is farmers like to farm, and they are not going to sacrifice yield by not fertilizing," said James "Joc" O'Rourke, CEO of Mosaic Co., on a recent call with industry analysts.
Agricultural economist Gary Schnitkey at the University of Illinois disagrees. In a market analysis report, he wrote, “given the high fertilizer costs, reducing fertilizer applications should be a high priority at this point.”
Schnitkey’s analysis also predicts the higher fertilizer prices will lead to an increase in crop prices.
“Corn prices likely will adjust such that corn and soybeans have the same relative profitability,” he wrote.
If crop prices go up, that could mean higher food prices, especially for meat, as many of the affected commodities end up as livestock feed.
Farmers are going to have to make difficult decisions on how to cope with the increase.
Danny Young, vice president at FCS Financial in Sedalia, a rural bank that works with farmers, said he is extending lines of credit to farmers who haven't needed to borrow money in years.
He doesn’t envy their position.
“It is a leap of faith because you spend this extra money on fertilizer, and you hope you have a good crop next year and prices are good to pay that operating loan back,” Young said.
Farming is always a leap of faith, said Taylor, but this year maybe more so.
“There is still a lot of penciling to do. If you don’t raise the crop, what do you do with all these excess inputs? It’s going to make it hard on these younger guys, too, and the guys who are already struggling,” Taylor said.
While the industry and agricultural economists agree the reason for the higher prices is understandable, not everyone is convinced.
The Family Farm Action Alliance wrote a letter to the antitrust division of the Department of Justice in December, asking for an inquiry into the fertilizer sector on the suspicion of anticompetitive practices.
“Out here in farm country, we can tell that something stinks about this fertilizer deal,” said Joe Maxwell, president of Family Farm Action Alliance. “The DOJ has the power and the authority to investigate fully, and American farmers deserve nothing less.”
The Department of Justice has not yet responded to the request.
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