What’s Behind Those Soaring Fertilizer Prices?

 By George Rehm, retired Extension Soil Scientist, University of Minnesota Extension

Why is fertilizer so high? Is the fertilizer industry gouging the American farmer?  Will prices go down in the near future? What can I do to reduce fertilizer cost? Is it time for some new thinking about fertilizer application? These are just a few of the many questions that growers are asking when they add up the fertilizer costs for the 2008 growing season.

Search for answers in the fertilizer industry and there are several explanations that range from more corn and small grain acres to much higher foreign demand.  It’s obvious that there is no one comprehensive explanation for the soaring prices.

We can’t deny that the American farmer is locked into a global market. Countries like China and India have a terrific appetite for phosphate and potash.  The greater demand translates into higher prices. Factor in more farmed acres and more production per acre and you have another explanation for high prices for phosphate and potash.

Nitrogen fertilizers are of special interest.  Recent research with spring wheat in northwestern Minnesota has shown that optimum rates of N fertilizers can be responsible for 25% of optimum yield. This input is directly responsible for a larger yield increase when compared to other inputs.  So, uneasy concern about the price of fertilizer nitrogen is justified.

The nitrogen fertilizer industry has changed dramatically in recent years. Today, about 50% of the available N used for crop production is imported -- mostly as urea. In the past six years, 25 nitrogen manufacturing facilities in the country have closed with no plans to reopen.  Factor in higher natural gas prices and you have the most common explanation for higher cost for fertilizer nitrogen.

Transportation costs cannot be ignored.  In this part of the world, we sit at the end of the “pipeline.” As fuel costs increase, transportation costs rise. This added cost is passed along in the form of a higher price for fertilizer nitrogen.

There is a positive spin-off to these higher nitrogen prices.  From 1980 to 2005 there has been a 74% increase in corn production in this country. At the same time, there has only been a 3% increase in the use of fertilizer N for this crop. Corn farmers have become more efficient users of N.  One can easily argue that wheat growers have also become more efficient.

There is room for improvement in the management of fertilizer N for wheat. There’s nothing new and some suggested practices are worth repeating.  Begin by soil sampling and measuring residual nitrate-nitrogen when wheat follows a crop other than a legume in rotation.  For maximum accuracy, sample after soil temperatures have consistently dropped below 50 degrees.

Then, take credit for legumes, manure, and nitrogen in sugarbeet tops if applicable.  Use of these credits can produce substantial savings in money spent for fertilizer nitrogen.

Apply any nitrogen fertilizer so that risk of loss is reduced to a minimum.  This means incorporation and avoiding contact between nitrogen and crop residue on the soil surface.

Because of production costs, it’s less expensive for the fertilizer industry to import urea and this product may replace anhydrous ammonia in crop production.  In our part of the world, this shift in product supply may shift nitrogen application from fall to spring for the spring wheat production system.

Will fertilizer prices come down?  We can only hope. Until they do, we have but one choice. Use this high return input as efficiently as possible.