Iowa Public Television


High Cost and Demand for Fertilizer Scares Farmers

posted on June 6, 2008

DAYTON, Ohio (AP) -- Corn stalks normally dominate the fields of farmer Lyle McKanna. But this summer, leafy green soybean plants will swallow up more acreage than ever.

McKanna, who farms 800 acres near Lima, has replaced more than one-fourth of his corn crop with soybeans, which require far less fertilizer.

In part because of a global surge in demand, the price of fertilizer has skyrocketed 228 percent since 2000, forcing U.S. farmers to switch crops, cut back on fertilizer or search for manure as a substitute.

Wholesalers and retailers are scrambling to find and buy fertilizer and juggle what supplies they have to meet customers' needs. Between 2001 and 2006, global demand jumped 14 percent, an amount equivalent to the entire U.S. market, according to The Fertilizer Institute, a Washington D.C.-based trade group.

"We're trying to get as much as we can and get it into storage," said Joe Dillier, plant, food, markets manager for The GROWMARK System, a farm cooperative based in Bloomington, Ill. "It's hard to buy as much as you want forward because everyone sees that this price is going to continue to go up."

The price increase means the cost of fertilizing an acre of average-yield U.S. corn rose from about $30 to $160.

Mike Duffy, professor of economics at Iowa State University who closely tracks the costs of crop production, said the more expensive fertilizer might increase the price of sweet corn this summer. And if enough farmers change over to soybeans, it could cause some localized shortages of sweet corn and increase the price of corn in grain markets.

The demand for fertilizer has been driven by an increasing world population and a growing middle class in developing nations that wants more grain-fed meat and more diverse diets. In addition, many U.S. farmers continue to use large amounts of nitrogen fertilizer on their corn because the crop's market price remains high and they feel they can still make a profit.

The stronger demand has helped raise fertilizer prices, combined with a weak dollar and soaring energy costs that make producing and transporting fertilizer more expensive.

The United States has lost more than 40 percent of its capacity to produce nitrogen fertilizer since 1999 because of the high cost of natural gas.

Hammelman Nitrate, a small, independent fertilizer retailer in Edwardsport, Ind., lost a few sales last winter because the company couldn't get supplies quickly enough for some of its customers.

"It's a big concern because you don't know whether the supply is going to be there or not," said Kevin Hammelman. "It's a big, big struggle."

Normally, Ceres Solutions, an agricultural cooperative with 26 stores around Indiana, buys fertilizer a few months before it sells it. Now it is buying nearly a year in advance to assure it can get what it needs.

"I'm already pre-ordering for next fall," added Thad Shidler of Howesville Farm Supply in Clay City, Ind. "We've never had to do that. It's always been available."

Some farmers are sticking to their traditional practices - nervously.

This year's corn plants on Bob Peterson's southern Ohio farm are getting the same amount of fertilizer they got last year. But it's costing twice as much - nearly $300 an acre.

"This is the riskiest crop I've ever planted," said Peterson, who farms 1,600 acres of corn and soybeans near Washington Court House, Ohio.

"If we get a normal yield, we will make money. But, boy, if we have a drought, reduced yields, insect problems - we'll lose a lot of money."

It costs more to fertilize corn than soybeans - about $160 per average-yield acre of corn to $120 for soybeans. And although the market price of soybeans is about $12.90 a bushel compared with $5.50 for corn, farmers usually can produce about three times the number of bushels of corn per acre than soybeans.

Vance Bauer has planted more corn this year on his 1,800-acre farm near Gowrie, Iowa, and plans to plant even more next year.

"The fertilizer inputs are high, but corn still makes more sense at today's prices," he said. "It's worth the risk."

The high price of fertilizer may have a silver lining. Karen Chapman, water and wildlife analyst for the Environmental Defense Fund, said that if U.S. farmers are using a little less fertilizer, runoff that pollutes streams and rivers could be reduced.

"We may see some benefits in water quality," Chapman said.

Tags: agriculture corn money news