Food prices rise amid concern of global shortages
Fertilizer costs soar as farmers cope with market forces like war
ARCANUM, Ohio – On a temperate morning in mid-May, Scott Stickley maneuvered a massive tractor across an empty field flanked by quaint, twostory farmhouses.
It’s a common sight near his hometown of Arcanum, a farming community roughly an hour and a half north of Cincinnati. The region of western Ohio is a vast expanse of farms interrupted only by the occasional water tower or patch of trees. The people who live there talk about sowing the same fields their grandparents worked decades ago.
Stickley manages roughly 1,900 acres of corn and soybean fields. And lately, he is nagged by doubts about holding on to a farm that’s been in his family for generations as his costs skyrocketed this year thanks to an indispensable commodity.
Spike in fertilizer prices means nervous farmers
“Last year, nitrogen (which is used as a fertilizer) was around $170 a ton, and this year at the local dealer it was around $600 a ton,” he said. “I was able to buy in front of some of the inflation, but it was still almost double what I bought last year.”
Stickley needs a lot of nitrogen. The fertilizer is applied before planting, and a pair of tanks perched atop the seed planter trailing Stickley’s tractor sprinkled liquid nitrogen as the machine sowed corn seeds.
The fertilizer price increase added roughly $50 per acre to the farmer’s total costs, he said.
Liquid nitrogen, potash and phosphorus, three of the world’s most commonly used fertilizers, have more than doubled in price in the past two years.
The price hike, in concert with rising costs for other items Stickley depends on such as diesel fuel, has the farmer worried he might not be able to pass the farm to the next generation.
“We’re very nervous,” he said.
As of May 1, the average price of liquid nitrogen was $730 per ton, diammonium phosphate was $1,050 per ton, and urea was $1,012, all of which are all-time highs, according to a survey conducted by Minnesota-based data analysis firm DTN.
“Fertilizer makes up about 30% of the cost of growing an acre of corn,” said Gregory Ibendahl, who teaches farm management for the Kansas State University extension service. “But with the fertilizer price increase, now it’s closer to 35%.”
In a recent news conference, President Joe Biden pledged to tackle the problem. His administration promised to create a $100 million program to boost fertilizer efficiency and find cheaper substitutes.
In the meantime, farmers don’t have realistic alternatives to fertilizer, said Gary Schnitkey, soybean strategy chair for the Agriculture and Consumer Economics Department at the University of Illinois.
“Nitrogen can be supplied by livestock manures, but those were being used before and there’s not going to be more of a supply of manure,” he said.
While Ukraine and Russia are both major fertilizer producers, the war in Europe is only one of the forces pushing up prices.
Why are prices on the rise?
“Most of the increase occurred during the second half of last year,” Ibendahl said. “I would not label this a warinduced increase.”
Fertilizer isn’t immune to the economic pressures driving inflation. Nutrient prices often rise in concert with corn prices, which are approaching alltime highs, Ibendahl said.
Natural disasters and the high price of natural gas, from which nitrogen is procured, contribute to the problem.
“When natural gas prices go up, nitrogen fertilizer prices also go up,” said Chuck Rice, chair of the board of agriculture and natural resources at Kansas State University.
Blame China, Ida, COVID, Russia
“Last year China cut exports of nitrogen fertilizer and Europe shut down nitrogen fertilizer production,” Schnitkey said. High natural gas prices in both places made fertilizer production too expensive, he said.
And several New Orleans-area nitrogen fertilizer plants shut down in the wake of Hurricane Ida, which hit Louisiana last August, Schnitkey said.
“Coming out of the pandemic there was a massive demand surge,” added Jason Grant, who directs the Center for Agricultural Trade at Virginia Tech.
And a surge in the price of fuel and natural gas trickled down to fertilizer, he said.
The war in Ukraine hit just as supply chain snarls were unraveling.
Russia, which is under sanctions for its unprovoked attack on its smaller neighbor, supplies roughly 20% of the world’s nitrogen fertilizer, Schnitkey said.
If fertilizer prices persist, food shortages will undoubtedly follow as farmers cut back to save money, Grant said.
“The larger issue is that if we cut back on fertilizer, that impacts yield, that reduces supply available for key staple grains and food products,” he said.
Wealthy countries like the United States will likely have the food they need, but low-income nations, some of which are already experiencing food shortages, could see their food supply dwindle even further, Grant said.
‘The only thing we can do is go up’
Roger Tobias manages 4,000 acres of corn and soybean fields spread across six counties in western and northwestern Ohio.
His fertilizer costs soared to $800,000 this year.
The farmer has precious few options to offset that increase that won’t hurt his bottom line. “You can skimp on certain things, but that’s going to hurt your yield and your return is not going to be there in the fall,” Tobias said.
Farmers don’t have the option of raising prices to compensate for higher costs. They are at the mercy of boards like the Chicago Mercantile Exchange, which sets corn prices.
Derrick Mote, who owns Mote Farm Service in Union City, Indiana, said the companies that supply his fertilizer charged higher prices than he anticipated this year and he had no choice but to pass those costs on to his customers.
“They’ve gone up a lot and the only thing we can do is go up with them,” he said. “It’s not what we want to do, but we have no choice.”
Farmers still could reap profits
Fortunately for growers, commodity costs are sky-high and show no signs of falling. Corn, for example, is currently $7.79 per bushel, up from an average of $5.75 per bushel in 2021.
“They’re just about the highest they’ve ever been,” Tobias said.
But farmers won’t see a windfall until harvest, leaving them to pay inflated input costs now.
“Farmers are penciling in pretty good profits, but it requires a lot more upfront money,” Ibendahl said.
However, high corn and soybean prices won’t save farmers who lose crops to bad climate weather, Tobias said.
“If we have a drought or something dramatic that causes poor yields,” commodity prices won’t offset expenses, he said.
Stickley said he should make it through this year as long as corn prices remain high. But he’ll be unable to insulate himself from today’s exorbitant fertilizer prices in 2023. “Next year, everybody is going to be in trouble,” he said.
In the meantime, he can only pray the weather cooperates and input costs don’t rise even higher.
“There’s a lot of faith when you’re a farmer,” Stickley said.