Declining Fertilizer Prices

 

Fertilizer prices this fall have started to decline since this time last year. Overall, fertilizer prices have dropped almost 66% since their all time highs but are still about 20% higher than pre- COVID levels in 2019. For farmers this is good news because fertilizer is a major cost. However, grain prices and fertilizer prices tend to correlate which means they travel in the same direction. Grain prices are declining also. Generally, fertilizer prices follow the grain price, so it is not all good news.

Why are fertilizer prices falling? Fertilizer production is a global industry. Russia is a major exporter of fertilizer, and the Ukraine-Russia war caused fertilizer prices to soar. For the United States, we had to find new supplies and new input sources. Canada stepped in and started producing more fertilizer, especially potash or potassium fertilizer, so prices have declined.

Russia and Belarus are major exporters of fertilizer. Although government sanctions were imposed on their exports, they were allowed to keep exporting some fertilizer, mainly because consumers benefit from lower fertilizer prices. Everyone wants cheap food. Russia and Belarus are finding ways to get around the sanctions and now we have some new fertilizer supplies. If the sanctions get lifted, expect fertilizer prices to go even lower. Most countries want lower food prices for their people.

For nitrogen (N), the source of the N comes from natural gas, urea, and ammonia which are much cheaper than the last several years. If fuel prices price again significantly, this could change quickly. However, these prices have decline overall, so farmers may benefit this next year.

Food prices have remained high but may start to decline. When fertilizer prices got high, farmers cut back on fertilizer applications. Weather was also a factor. Dry weather in the USA is resulting in much lower soybean yields. Wet weather in China and India reduced rice yields. Less fertilizer and poor weather resulted in lower crop yields, causing food prices to rise. For almost all farmers, there have been shortages and reduced availability of replacement parts, equipment, and timely delivery. With supply chain issues, less parts, and large labor shortages throughout the USA, this caused production problems for farmers causing food prices to remain high. As these issue get sorted out, hopefully, food prices will start to decline once the farmers get another crop planted and harvested. However, weather and other factors throughout the world can always change.

For farmers, lower nitrogen fertilizer prices are welcome news. Anhydrous ammonia (82% N or 1640# N/ton) is a major nitrogen (N) source for grass crops like corn. The price in 2022 was $1,387/ton and now in the year 2023 its $680 or a decline of 51% or $707/ton with N priced at $.41 for each actual pound of N. Liquid N sources like UAN 32 (32% N, 640#N/ton) declined 42% from $679/ton to $391 today, a $288 decline. UAN28 (28% N, 560#N/ton) declined 40% from $592/ton to $355 today, a $237 decline. For urea (46% N, 920# N/ton), a dry white fertilizer, the cost in 2022 was $812/ton and declined to $730, a 31% decline or $249 less expensive. On a per pound basis, the cost per pound of N is $.61/pound UAN32, $.63/pound UAN28, and $.79/pound for urea. Nitrogen prices vary and change almost daily.

For potassium and phosphorus fertilizer prices, the trend has been the same. For potassium or potash (K), prices in 2022 were $883 a ton with a 41% decline ($365) to $518 a ton in 2023. Potash is 0-0-60 or 60% K or 1200# per ton worth about $.43 per pound of actual K. For phosphorus (P), the two main sources of P are DAP (18-46-0) and MAP (11-52-0). DAP has 18% N or 360#N/ton and 46% P or 920#P/ton. MAP has 11% N or 220#N/ton and 52% P or 1040#P/ton. Prices for DAP went from $1,003/Ton and declined 27% ($273) to $730. For MAP, the price in 2023 was $1,036 and declined 29% ($300) to $736 today. If we assume the N is worth about $.60 per pound, in DAP; the value of the P is about $.56/pound and in MAP, the value of the P is about $.58/pound.

Overall, adequate fertilizer and plant nutrients support higher crop yields. With fertilizer prices declining, farmers will probably put on more fertilizer in 2024. However, in 2023; inflation, lower crop prices, and possibly lower or stable yields depending on rain; might continue to have farmers tightening their belts as margins and profits remain tight. Watch out for our Farmers on the road and have a Safe Harvest!