The fertilizer industry is flush with good news (as far as farmer customers are concerned). The supply/demand scenario has morphed into a different ball game compared to 12 months ago.
Before delving into numbers, let’s review. Some fertilizer synthesis chemistry, addressing nitrogen, first. Ammonia is usually manufactured when atmospheric N and natural gas/methane are combined and subjected to high pressure and heat in the presence of iron catalysts. Ammonium nitrate is formed when ammonia, a chemical base, reacts with nitric acid. This compound is considered by Department of Homeland Security to be a hazardous material.
Urea is formed when carbon dioxide is forced to react chemically with ammonia. The cost of natural gas – which had been increasing greatly up until a year ago – strongly influenced the price of ammonia, urea, ammonium nitrate and a blended product called urea/ammonium nitrate (UAN); UAN is not considered hazmat.
Ignoring trace elements, we can get a good handle on the market dynamic of the four soil macronutrients: N, phosphorus, potassium and sulfur. We grasp this “handle” by examining the cost elements of 10 different commodity ingredients – namely, urea, UAN, ammonium nitrate, ammonium sulfate, ammonia, di-ammonium phosphate (DAP), mono-ammonium phosphate (MAP), muriate of potash, sulfate of potash and S.
Although I’m examining a chart showing dollars-per-ton costs and percentages of price change, I’ve opted to figure an average percentage decrease for all 10 commodity ingredients. In making comparisons, I used Sept. 21, 2022 as a starting point and Sept. 21, 2023 as the finish line. On average, the 10 ingredients’ prices decreased 34.5% over those 12 months. The most typical cost change was evidenced by ammonium sulfate, whose price per short ton decreased 37% (from $470 to $298). The raw data here were forwarded to me by Jeff Cassim, marketing director for Liquid Products, based in Seneca Falls, NY.
In the last five years, price pressure on the demand side has been very influential also. At the start of that period, corn and soybean yields in South America – particularly Brazil – suffered greatly from widespread drought. In 2020, American growers of those two grains zealously planted more total acreages to fill the void caused by poor harvests in the global south.
Another factor entering this picture was the horrific loss of these grains in Heartland USA caused by Winter Cyclone Ulmer in March 2019. Ulmer claimed many thousand tons of stored corn and soy through destruction and/or spoilage beyond use. As domestic growers planned to fill this void also, price for these two grains increased accordingly on the Chicago Board of Trade. This fact (during autumn 2020) encouraged even more producers to increase plantings. Resulting demand for crop inputs put upward pressure on fertilizer costs, particularly “N-goods.”
To throw a little more gasoline on the fire, China committed to seriously rebuilding its hog herd, which had been halved by an African swine flu epidemic. China began buying huge quantities of U.S. corn. They also opted to retain huge quantities of domestically produced urea to underwrite their own corn crop for 2021. Much of that urea had originally been slated for shipment to the U.S. and India.
Further complicating matters was the fact the China had also cut back urea production to help clean up its air prior to the Olympics scheduled for February 2022. All these factors helped hike the costs of trans-Pacific shipping – costs ultimately passed on to purchasers of China-made crop inputs.
Just when the fertilizer supply/demand situation was becoming a little less chaotic, a major chemical spill occurred at a huge phosphate factory near Tampa, FL, in May 2021. Many thousands of gallons of phosphoric acid, a highly manufactured material, spilled into the immediate environment. That facility’s operations came to a screeching halt.
Florida has significant reserves of soft rock phosphate, which in its raw, unrefined form is a major organic fertilizer source. When treated with phosphoric acid – then further treated with ammonia – end results are MAP and DAP. Naturally, following the spill, these fertilizer ingredients shot up in price. But what really caught my attention, during September 2021, was the 80% price increase for dical. Dical (full name: mono-dicalcium phosphate) supplies most of the P needed in livestock diets.
In October and November 2021, high demand for fertilizer was shored up by unusually large autumn applications which had been encouraged by high commodity grain prices, preceding spring plantings of corn and soy. The prevailing mindset among growers was “get the fertilizer now – I don’t know if it will be available come spring.” When farmers asked crop input suppliers if fertilizer would be available in spring 2022, the standard reply was “We’re doing all we can.”
My recommendation was to get as much affordable fertilizer as needed – based on soil testing – during autumn and then storing it under cover. I also said to not apply it during autumn, unless soil organic matter exceeds 4% on a good firm sod. All the fertilizers listed above are very soluble, thus very prone to leaching under lower organic matter. I told folks that winter forages – rye, wheat, triticale, barley and speltz – were a good place to apply N in late autumn and early winter. Triticale metabolizes 70 lbs./acre of cold weather N – but better limit the other winter forages to 50 lbs., due to greater lodging threat.
Spring and summer 2022 turned loose their own bag of tricks on crop growers, as all three river branches of the Mississippi Basin defied statistics and together suffered acute drought. Lower river levels reduced barge traffic by two-thirds at most locations most of the growing season, putting serious cramps of fertilizer logistics.
Toward the middle of growing season 2023, fertilizer prices descended to the depths described earlier, prompting me to recommend that growers buy what fertilizer they can afford this autumn, feeding some of it to winter forages. After all, these are the crops that will be harvestable next May, 10 days ahead of perennials.