Lance Lillibridge, a farmer in east central Iowa, knows farming’s ups and downs. He has been in this business since he was “knee-high to a grasshopper” and is the first of a family of farmers to own his land. But he said the sharp increase in fertilizer prices this year has put him in a challenging position.
“It’s very gut-wrenching,” he said. “It’s very difficult to be optimistic about the future because these prices are so high.”
This year’s drastic increase in fertilizer prices has hit farmers’ pockets, and many have opted to buy less fertilizer and look for other alternatives to nourish the soil.
However, fertilizer manufacturers have largely escaped unscathed: The high prices — which have soared past inflation — have cushioned their bottom lines from any decline in sales, according to financial reports.
This year, giant fertilizer companies hauled in hundreds of millions in net earnings. The rise in profits represents massive percentage increases since last year. One major producer’s earnings jumped more than 1,000% in the first nine months of 2022 than in the same time period last year.
Lillibridge’s 2,500-acre farm in Vinton, a town in Benton County, mostly grows corn, a crop that requires a lot of fertilizer compared to soybeans or wheat.
Although corn has sold at high prices over the last two years and grain is expected to remain high, Lillibridge said it’s “very frustrating as a farmer” right now. Farmers could be paying hundreds of thousands more for fertilizer, he said.
“It’s difficult to be able to pencil this out,” he said of planning the year ahead. “Right now, I can’t even get a price on fertilizer for spring. So how do I make any decisions?”
Fertilizer — which makes soil more productive — can be the difference between a good and bad harvest in many cases. Because of that, modern American row crops have become dependent on fertilizer, after generations of farming have degraded topsoil.
Runoff from fertilizer also can have disastrous downstream effects. It exacerbates the “dead zone” — an area where fish can no longer live — in the Gulf of Mexico, and it poisons drinking water.
Midwestern farmers spent nearly $4 out of every $10 of the cost of growing corn on fertilizer in 2021, according to the most recent data of the USDA’s Commodity Costs and Return. For soybeans, fertilizers account for less than $2 out of $10 of operating costs.
“The increase in fertilizer prices has probably been the number one issue” for farmers, said Nicholas Paulson, professor in agricultural economics at the University of Illinois at Urbana-Champaign.
Paulson said fertilizer use is significant for soybeans, but corn is more dependent on fertilizers — especially nitrogen fertilizer, one of the main types of fertilizer, along with phosphate and potassium.
Fertilizer prices have risen for the past two years but reached record highs last spring. Multiple factors have driven the increase.
Russia’s invasion of Ukraine (both countries are major producers), the subsequent economic sanctions and disruptions to Black Sea trade routes have further increased trade costs and uncertainty for Russian and Belarusian exports.
Prices for fertilizer have fallen since spring but remain high. While not as high as in the spring, fertilizer costs are significantly higher than a year ago and remain higher than in 2019.
This increase is considerably higher than for other prices across the economy. From the third quarter of 2019 to the same period this year, the average price of two of the most widely used types of fertilizer, diammonium phosphate (DAP) and potash, doubled in cost, according to an analysis of DTN/The Progressive Farmer fertilizer price data by Investigative Midwest. In contrast, overall inflation in that period was 20%.
But the most significant price increase over that same time period has been for anhydrous ammonia, an effective and widely used nitrogen fertilizer. The price of anhydrous ammonia fertilizer increased by 152%.
“This is not normal,” said Lillibridge, who also is a member of the board of directors for the Iowa Corn Growers Association. “In years past, we’ve had a pretty good idea what we could buy fertilizer for in the fall and what we could buy it for in the spring.”
He said that’s a burden for farmers because they have had to triple their fertilizer budget. If they had planned to invest $400,000, that means they now have to spend $1.2 million, he…
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