Tackling high input cost with grit
CUSTER COUNTY Look up the word “grit” on the Internet and you will find several synonyms including courage, resolve, strength of character, guts, resilience, tenacity and pluck.
When it comes to any of these words, perhaps no one has more of what they describe than Nebraska farmers and ranchers. Who else takes on factors completely out of their control - markets, equipment and technology challenges, disruptions from the pandemic and the ever-present unpredictability of Mother Nature - and literally bets the farm or ranch every season? With a mix of faith, data and grit, they make it work.
One factor that is having drastic impact on agriculture this year is the high prices of fertilizer.
“One landlord that buys right before the end of the year paid 3.1 times higher than what he paid in December, 2020,” Merna farmer Don Cantrell said. “That tells the story right there.
In a Jan. 14 interview, Paul Ulmer, manager of Trotter Fertilizer in Broken Bow, said the same thing, that liquid nitrogen tripled in price in the last year. “In the last six months, it’s gone from $400 a ton to $650 a ton,” he added.
Nitrogen is a key component in fertilizer for corn and soybeans. Think back to high school biology. Nitrogen creates chlorophyll which makes plants green. Chlorophyll is necessary to turn sunlight into energy so the plant can grow. As plants draw nitrogen from the soil, the supply in the soil is depleted and it must be
replenished.
It’s just not nitrogen. Prices of other components - phosphate, pot ash and others - have gone up as well.
“Dry phosphate was around 50 cents per pound (in October). Now it’s 85 to 90 cents per pound,” Nolen Hueftle, agronomist with Ag Advisory Services, said.
Ulmer said local producers could see an increase of input costs up 40 to 45 percent from last year. “It could be $1,100 to
$1,300 per acre for corn and $700 to $900 for soybeans,” he said.
In 30 years in the fertilizer business, Ulmer has never seen anything like it. “I’ve been in the industry since 1991. This is crazy. I know this word is used a lot right now but this is unprecedented in agriculture.”
Pete Cullen, vice-president of agronomy at Country Partners, agreed. “It’s really crazy how high things have gone,” he said. “Prior to
this, there was a low fertilizer to corn ratio. This made up for that in a hurry.”
So in the middle of unprecedented times, what are producers to do? Many producers already locked in lower prices by buying early. Those who haven’t yet bought have to consider options. They can buy now at high prices or take a chance that prices will be lower in March.
Cantrell’s advice is to wait. “I don’t think
there’s much concern that prices will go higher. You can wait and hope. The alternative is buy now at a high price or buy then maybe at a high price.”
Few producers would probably exercise the option of no fertilizer.
“Your yield expectation could drop 100 to 150 bushels an acre,” Ulmer said. “It could be 50 to 60 percent less.”
Hueftle said such a decision would need to be considered field-by-field
basis. “One field you may be able to back off. Another field you may need more.” He emphasized that management is critical. “At some point, you have to put fertilizer in. Not using fertilizer will take it (yield) down quite a bit,” he said.
Another option is feedlot compost, something organic farmers have been doing. Adams Land and Cattle and other local feedlots can be local sources for local producers.
demand for Adams compost since August and September,” Ulmer said.
Adams Land & Cattle has marketed manure to local farmers for decades and it remains an excellent product to build soil fertility.
Dean Millsap with Adams said, “Demand for fertilizer is playing a key role in tightening available supply. Adams continues working with our customers to meet their needs. Farmers interested in learning more about Adams manure program can connect with Dave Zauha at 308-767-2460.”
Just like other fertilizer options this year, Cantrell said the price of compost is something for a producer to consider. While manure may be not that expensive, transportation can be. “The expense is in the trucking and spreading. It gets very expensive the further you are from the feed yard,” Cantrell said.
Huetfle’s advice to producers is to stay in contact with their advisors and suppliers, adding. “The situation is fluid. Make changes where needed.”
Ulmer has similar advice. He said producers must know their margins. “We go through a lot of break-even plans (with
producers),” he said.
Cullen said most of Country Partners’ customers have pre-purchased. However, for those who haven’t, it will help the company if they know what farmers are needing. “We’ve got to pull the trigger and finally nail down what to buy,” he said. “The worst thing is not have product for your customer.”
It’s not only fertilizer. Costs have risen for other ag chemicals such as herbicides and pesticides. Roundup, the most widely used glyphosate-based herbicide, had doubled in price. Generic glyphosate is not affected either. “Almost all generic glyphosate comes from China,”
Ulmer said. “They are not shipping.” Cullen said it’s realistic to expect some shortages as well.
What are the causes of such dramatic increases? It’s a combination of several factors, both global and domestic. For example, some dry phosphorus is manufactured in the US but the majority comes from China. In June, 2021. China announced they would not be exporting the product.
“As a result, prices have risen,” Ulmer said. “But there are other factors. Manufacturers want more money. Labor cost have increased. Transport costs have increased.”
Potash (potassium
chloride), another component of fertilizer, has seen an increase in price. Canada is the world’s leading producer of pot ash, followed by Belarus, Russia and China. According to the investing website, The Motley Fool (www. fool.com), in 2017, there were only three companies - Potash Corporation of Saskatchewan, Mosaic and Agrium - that are the members of Canpotex, one of the world’s largest marketing associations that handle all potash exports outside the U.S. and Canada. Ulmer said Mosaic currently has about 90 percent of the market.
Ulmer said about 30 to 40 percent of the nitrogen used in the US is imported, with China being a major supplier. When the supply from China became unreliable, producers and dealers turned to US manufacturers.
“Thirty years ago, there were 11 manufacturers (of nitrogen) in the US. Now there are three,” Ulmer said. Koch Fertilizer, LLC headquartered in Wichita, Kan., produces 40 percent of US nitrogen. Their fertilizer products also include ammonia, urea and urea-ammonia nitrate (UAN).
And then there was that deep freeze from the
Dakotas to Texas a year ago. “Three or four of their (Koch) plants froze and shut down,” Ulmer said. “They decided to update. Two weeks stretched out to six or seven weeks.”
Toss all these factors into the bin and then add manufacturers limiting what can be ordered, beginning in July, 2021. Ulmer said when ordering last summer, he could order 30 to 40 percent of what he’d normally ask for. At the first of the year, the limit was five percent. Cullen also said Country Partners had limits on what they could order.
2021 was a banner year for corn producers and many say the manufacturers are raising prices to get a bigger share of that profit. “It’s price gouging, that’s what they’re doing, and they need to be called on the carpet,” Cantrell said.
A Jan. 12 press release from the Nebraska Corn Growers Association (NECGA) stated that a Texas A&M University study validated farmers’ fears that prices are being artificially manipulated.
An excerpt from the press release reads, “‘As part of this study, we conducted an historical analysis going back to 1980 and found that fertilizer costs tend to go up when corn revenues increase,’ Dr. Joe Outlaw, lead researcher of the study, said. ‘Notably, these prices tend to go up exponentially even after accounting for natural gas prices and higher demand.’”
The press release states that “farmers are worried about a petition by CF Industries with U.S. International Trade Commission to impose tariffs on nitrogen fertilizers imported from Trinidad and Tobago
and Russia ... Despite a widespread condemnation from ag groups, the U.S. Department of Commerce released a preliminary finding recommending tariffs.”
Andy Jobman, presdident of NeCGA and a farmer from Gothenburg was quoted as saying, “Costs of fertilizers are sky high and will continue to climb with the addition of the proposed tariffs. Nebraska’s farmers have been experiencing financial difficulties for the past several years due to low prices. High input prices are going to cause
great financial harm to many operations after we finally thought we caught a break. High nitrogen prices are eliminating profitability for family farms.”
Asked if higher prices for producers will translate in the end to higher prices for consumers, Cantrell said no. “The only way to pass on higher prices is to use less fertilizer and produce less corn. Then the consumer will pay more because the price of corn goes up.” Right now, Cantrell added, “The farmer is the loser,
not the consumer.”
Despite the high prices, Ulmer said fertilizer is and will be available for local producers. “Some of it is in right now. Some we will receive in March. It all will get here,” he said. “It’s just a matter of time.” As to what the prices may be, he says he doesn’t have a crystal base. He hopes the prices have peaked. “We haven’t seen increases since the first of December.”
Hueftle said he believes there will be enough fertilizer this spring, though some producers may have
to make changes and accept substitutes. “We may shift a lot more to dry,” he said. “Dry phosphate is about 30 to 40 cents cheaper than liquid.”
Dealers like Trotter Fertilizer and Country Partners and consultant services like Ag Advisory Services are ready to stand with their farmer and rancher customers.
“We’re kind of held hostage by a market tied to the global market,” Cullen said. “But farmers have got to be eternal optimists and we are owned by farmers.”
“We’re in this together,” Ulmer said. “Whether it be fertilizer or equipment, we definitely work hand in hand with local producers. If our farmers aren’t successful, we aren’t successful.”
Even in these unprecedented time, some folks are predicting another banner yield for Nebraska grain producers. Despite the challenges of high input price, using the grit that has seen them through the years, our farmers and ranchers might just make that happen.