Ben Klick

Farmers pushing back on fertilizer prices

By Matt Reese

In the place of yield records, new local equipment purchases and who-bought-what-farm around the corner, conversations between farmers this winter are instead largely focused on skyrocketing fertilizer costs. 

“The coffee shop talk around the neighborhood is different every year. Farmers always seems to have something to yelp about a little bit. This year it is definitely fertilizer. The last couple of years we have seen moderate, manageable prices for fertilizer. Then all of the sudden we see some increases in commodity prices and boom — we shouldn’t have been surprised — we have some crazy increases in input prices. The alarming part is how drastic of an increase we saw and the reasoning behind it,” said Ben Klick, who raises crops and cattle in Stark County and serves as president of the Ohio Corn & Wheat Growers Association. “Our dry fertilizer prices have gone up, same with liquid, and the availability is going to be quite interesting too going into this spring. I don’t have a big building to store all my dry fertilizer and my liquid, so we are not only concerned about the prices and whether they will pencil out, but we’re also worried about being able to get the availability in season.” 

Even with better crop prices, the massive increases in fertilizer costs are making it tougher for corn acres to pencil out for some farms. 

“We were putting some numbers together after harvest because we do a lot of our buying in the fall of the year. Just for our 800 acres of corn it is going to cost us an additional $102,000 increase in price just for our liquid 28% fertilizer from what we used in 2021 to what we’re going to use in 2022,” Klick said. “That is the talk of the town. We feed a lot of our corn to livestock so we are always going to need a certain amount of corn no matter what. A lot of folks are penciling out corn versus soybeans and if they are willing to switch up their rotations. It may come down to availability and the markets around you. If you have a good strong corn basis, you may be apt to plant some corn and take that risk to take advantage of those better prices. I have a lot of neighbors I talk to, some are large operations and some are small acres. They’re going to do what pencils out. Everybody’s operation is different. Some pencil out to keep the same rotation and a lot of others are not going to take on that input cost up front and they may go a little heavier on the soybean side this year.”

Klick is also concerned about the ripple effect of high input costs through the rest of the supply chain.

“We are penciling out the cost of production on the crop acres, but we have a cost of production on the cattle as well. When you get the higher grain prices, they should come with higher cattle prices, but the input costs of feeding the cattle seem to go a lot higher than the other end of things when we go to sell the cattle. When you’re trying to forward contract and put a pencil to things it kind of makes you wonder sometimes,” Klick said. “My grandpa always used to say farmers always have something to complain about and are never happy. But when you sit down and factor in some of these things, if one thing goes up you can cut. When you start factoring in what you can do on your cost of production when everything is up, you have to start scratching your head and wondering what to do.”  

Through his involvement with Ohio Corn & Wheat, Klick has been learning more about this issue that goes well beyond the confines of Stark County coffee shops. Through the National Corn Growers Association, state organizations (including Ohio) commissioned two studies taking a look at fertilizer prices — one focused on nitrogen and the other on phosphorus.

In response to the phosphorus study, NCGA and OCWGA had multiple conversations with Mosaic Co. concerning the tariffs that were imposed in March by the U.S. International Trade Commission at the fertilizer company’s request. Since then, fertilizer prices have dramatically increased. 

“Mosaic’s posture to date has been a masterpiece of irresponsible corporate social responsibility,” according to a letter from NCGA.  

The letter highlighted the issues Mosaic Co. has placed on its customers and suggested the company’s monopoly is creating serious problems for farmers. Estimates show that tariffs between 30% and 70% on phosphate imports would equate to roughly $480 to $640 million in added fertilizer bills for U.S. farmers.

“…only 15% of phosphorous imports now come into the U.S. without tariffs,” the letter said. “And experts say that using Commerce and ITC to manipulate the supply curve does indeed dictate price to farmers.”

With regard to nitrogen, the nation’s corn farmers are concerned about a petition by CF Industries, one of the country’s major nitrogen producers, with the U.S. International Trade Commission to impose new tariffs on nitrogen fertilizers imported from Trinidad & Tobago and Russia. The U.S. Department of Commerce has since released a preliminary finding recommending tariffs, despite these concerns and the staggering price increases. The proposed tariffs are 10% on urea ammonium nitrate (UAN) from Russia and 2% on UAN coming from Trinidad & Tobago. Based on prices as of the end of October, a 10% tax on imported UAN would imply an additional increase in prices paid by farmers of $102.25 per ton. At roughly 8 acres per ton, that would translate into an additional $12.78 per acre nitrogen costs for all farmers 

“A company like CF Industries is trying to impose tariffs on other countries for importing nitrogen into this country,” Klick said. “They are predicting it would send the average price of nitrogen up another $100 a ton. That will have a drastic ripple effect through farm country.” 

From Texas A&M University’s Economic Impact of Nitrogen Prices on U.S. Corn Producers

The new economic analysis released in January by researchers at Texas A&M University found the pending tariffs on nitrogen fertilizers would create additional shortages and cause prices to increase even more for farmers.

“As part of this study, we conducted a historical analysis going back to 1980 and found that fertilizer costs tend to go up when corn revenues increase,” said Joe Outlaw, the lead researcher on the study at Texas A&M. “Notably, [today’s] prices tend to go up exponentially even after accounting for natural gas prices and higher demand.”

The study found the price of anhydrous ammonia increased by $688 per ton — $86,000 for a 1,000-acre farm — from the end of 2020 through the end of October 2021.

“This issue is almost all we hear about today at every meeting and gathering of farmers — the price of inputs has gone up. When farmers are talking about 300% cost increases from a year ago, it raises red flags. We just can’t let this go without looking into this,” said Tadd Nicholson, executive director of Ohio Corn & Wheat. “There are clearly supply chain disruptions with everything from tennis shoes to fertilizer, but none to the tune of 300% increases. This is causing us to ask a lot of serious questions. One question we are really focused on right now is about the tariffs on imported fertilizer that would further increase the prices from today’s levels going forward. We are going to increase the price of domestically produced fertilizer as well as the imported fertilizer. And, when you put a tariff in, it is for 5 years. This is not a 1-year blip where farmers can expect things to go back down next year. This is a multi-year issue. All of the other factors that go into the price of fertilizer will take time to work through the system. Today we are focusing on these tariffs. This is an unfair time to put tariffs on fertilizer when we have all of this disruption going on in the market.”

The A&M research also found some clear trends in the fertilizer market. 

“It clearly shows that prior to 2010, the price of nitrogen fertilizer followed the price of natural gas. That is what you make nitrogen fertilizer out of so when the price of natural gas went up the price of fertilizer followed. When natural gas would go down, so would the price of nitrogen. That stopped happening around 2010 when it decoupled from that price. Now the price of fertilizer basically follows the price of corn,” Nicholson said. “Fertilizer companies are no longer pricing fertilizer based on their input costs of natural gas. They are pricing fertilizer based on how much money farmers have in their pockets. We are saying that’s not fair, especially at a time like now with so many disruptions in the market.”

From Texas A&M University’s Economic Impact of Nitrogen Prices on U.S. Corn Producers 

So far, conversations with Mosaic Co. have not resulted in any indication the situation with tariffs will change. Nicholson is hoping CF Industries will be willing to talk, and listen. 

“Everybody that uses corn should be focused on this. If we produce less corn either through fewer acres or lower yields because of less fertilizer use, it will raise the price of corn and every end user will feel this,” Nicholson said. “Every importer or livestock farmer or ethanol plant, all of them will be feeling these effects.”

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One comment

  1. I’m encouraged to see my fellow farmers are finally grasping the destructive nature of tariffs whether they are imposed as direct tariffs by an Administration or as countervailing duties through Dept. of Commerce by corporations. ?

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