Midwestern farmers see fertilizer prices skyrocket ahead of the planting season
Regular readers of American Experiment know that I’ve been very concerned about the skyrocketing price of fertilizer. There’s a very personal reason for this worry; my dad still operates the family farm I grew up on in Wisconsin and the soaring cost of inputs will have a big impact on his business.
Our farm was never big by modern standards. At its largest, the farm was 500 acres and during the course of my childhood, we raised corn, soybeans, hay, dairy cattle, beef cattle, and hogs. The scope of the operation has been scaled back as Dad’s gotten older, and he currently farms about 300 acres.
I talked to him last week and he said that the price of fertilizer is through the roof.
Dad uses 40 tons of fertilizer for the 300 acres he farms. He paid $370 per ton of Urea last year. This year, he paid $860 per ton. This means his annual fertilizer bill jumped from about $15,000 in 2021 to $34,000 in 2022, a $19,000 increase year-over-year.
I asked him if he thought about cutting back on fertilizer purchases a little this year because of the cost. He said the problem with halving fertilizer use to help curb costs is that it reduces yields by 30 to 40 percent.
This is a problem because the first 60 to 70 percent of your yield pays the costs, and the remaining 30 to 40 percent is your profit margin. Cutting back on fertilizer can also have the unintended consequence of annoying your landlord.
My dad said, “You don’t want to be in an area with a lot of big farmers and have your corn look bad. If you’re renting land, you don’t want your landlord to think you’re not taking care of the soil.”
Rising input prices will impact the price of corn. Dad said that his breakeven price for corn will be around $4 per bushel this year. Last year it was $2.50 to $3 per bushel. For other farmers, the breakeven price will likely be a little higher because my dad owns all of his equipment outright.
Higher costs for corn will impact every sector of the food supply chain. Meat prices, which are already high, will continue to increase because 40 percent of the U.S. corn crop is used for livestock feed.
Making matters worse is Russia’s decision to ban exports of fertilizer for the next two months. This is significant because Russia is the world’s largest exporter of fertilizers, and while the United States does not directly purchase Russian fertilizer, the export ban will put upward pressure on global fertilizer prices.
Unfortunately, food prices will continue to increase foreseeable future.