Farmers Facing Higher Crop Costs

Fertilizer and crop protection product prices are soaring

For the 2022 crop season farmers are seeing rising costs on inputs and capital needs to grow the same crop as last year.

To some, these rising costs seem to be an abrupt change, however it has been happening for over the last year and all just hitting the farm gate in a much shorter period, explained Adam Day, Agronomy Sales & Marketing Manager for Conserv FS.

Dry fertilizer is spread by an applicator on a field before crops are planted. Commonly used dry fertilizers are potash, phosphates, sulfur, zinc and sulfate. Fertlizer puts required nutrients back into the soil.

“One of the reasons that the change feels so abrupt is over the last year suppliers have been utilizing inventory levels previously purchased hoping that there would be a reprieve to where the higher prices would not be passed along to farmers,” said Day.

“As the year progressed with global factors impacting the supply chain this reprieve has not yet occurred causing suppliers to realize the increases that happened in the market, and this is now showing up at the farm,” he said.

Adam Day provides an analysis of what is causing farm inputs to escalate.

Anhydrous ammonia (NH3) is a widely used source of nitrogen fertilizer. It is applied in the spring or fall to promote plant growth. The ammonia gas is contained in these white tanks which farmers or supply companies apply with a toolbar and inject into the soils.

Phosphates – In the phosphate markets we have three major reasons we are seeing a rise in the markets. One of them is the CVD (Countervailing Duty) case filed by a major US supplier over a year ago. This slowed imports into the US market during a time where an increase in demand had already occurred.

The next part of this was the impact of Hurricane Ida which played a role in slowing domestic production as well as disrupting logistics.

The third part impacting this market is that we have had countries that would generally export phosphates start limiting exports from their countries for supply security purposes for their own countries.

Potassium – The potassium market supply began seeing supply challenges coming off the fall of 2020 with record usage in the US. During this high demand time there was also a large supplier that had an issue where they had to shut down a major mine that supplied the market.

Additional factors yet to come are the other markets that may have been supplying the global market on a smaller scale slowing exports which will change the global flow of potassium fertilizers. After the demand increase and the supply decrease from facility challenges this market has not yet caught up with supply.

At some point this market will recover the production volumes, however when it does it will continue to fight logistical challenges that we will continue to see across the industry.

Nitrogen – The nitrogen market has also seen its share of challenges. Like the phosphate market we are seeing some responses from a CVD case against some suppliers that would normally import product into the US Market. This has slowed imports. Natural gas is key in nitrogen production.

Liquid crop protectants and liquid nitrogen are applied pre-plant by a floater. This TerraGator floater was applying a corn herbicide and nitrogen on the farm field before corn planting. Farm fertilizers are commercially manufactured in liquid, dry or gas forms.

Two major things have happened in the last year that are impacting the market on a global and domestic scale. The artic blast last season that stretched across the US caused several manufacturing facilities to slow or shut down production to allow the increase demand of natural gas for heating to be supplied. Globally the European markets are seeing record high natural gas prices which has also caused production to be slowed or shut down. When these shutdowns occur, they take away supply but may not slow down the demand which will put us in the supply/demand market that we are seeing today.

The next challenge is that in a supply/demand market is getting the product at the right time into the right places to be applied when needed. Additional logistical expenses to do this will be reflected in the price at the farm gate to have supply available in many cases.

Crop Protection Products

Another area of our inputs that is being focused on as we prepare for the 2022 crop is our crop protection products. This market is being challenged very heavily on logistics.

By logistics this could mean anything from having people to make the active ingredients, shipping to the port, shipping across the ocean, unloading into US ports, transferring product from the US ports to manufacturing facilities, having containers to put the completed product in and then distribution across the country.

There are a lot of factors that can disrupt this supply chain and challenges are occurring every step of the way. Over the last year we have seen several price increases from all manufacturers as they try to stay ahead of increasing expenses trying to be reliable suppliers of products in these unprecedented times.

Depending on the products in question, we are seeing anywhere from 10% to 300% increases in farm production costs.
The next challenge in this market is going to be the supply of preferred products. With so many challenges that could put receiving these products in adequate time for applications, we will all need to remain flexible. Cutting farm input dollars may not always be the answer.

I encourage farmers to look at this from a different view of how to maximize return per acre or per bushel. Farmers must focus on how to match up expenses with income as they consider decisions to manage their operations.

Adam Day, Conserv FS, Agronomy Sales & Marketing Manager