Farmers Feel Bite as Rising Fuel Prices Push Fertilizer Costs Up
Farmers applying fertilizer in advance of planting this year have encountered sticker shock.
Fertilizer costs are up by as much as 30 percent and are hitting record levels. Add to that diesel prices of around $2.20 a gallon and it becomes clear that planting an acre of corn or soybeans will cost more.
"I don't know where it's going to stop," said Davenport, Neb., farmer Mark Jagels.
Changes in the cost of natural gas, a key component in the production of and ingredient in nitrogen-based fertilizers, are driving fertilizer costs. Anhydrous ammonia, which cost an average of $253 a ton in 1999, now is $415 to $440 a ton. A ton of anhydrous ammonia typically covers 10 to 12 acres.
"We outlay so much money before anything comes in on this year's crop," Jagels said. "With the costs rising it seems we outlay more and more before we get anything back."
Dry weather has accelerated the normal application schedule, further driving up costs.
Normally, fertilizer suppliers are making March deliveries in the southern farm belt, such as Missouri, Kansas and Oklahoma. But farmers in Iowa, Illinois and Nebraska also have been applying fertilizer this month, said John Tyler, a Pacific Junction, Iowa-based territory manager for United Suppliers, a wholesaler.
"A lot of farmers in this area are putting anhydrous ammonia on fields that normally wouldn't be (getting it) until April," Tyler said.
James Russmann, agronomy manager for Farm Service Co. in southwest Iowa, said farmers who bought their anhydrous ammonia last fall probably saved about $65 a ton. Farmers buying now have complained about the price increases.
"They grumble about it, but what are they going to do? They have to have it to grow corn," Russmann said.
On the positive side, farmers' purchases of fertilizer, fuel and seed inject an estimated $3 billion into rural communities, said Don Hutchens, executive director of the Nebraska Corn Board.
"While it's an expense for farmers, it's a tremendous economic multiplier for the state's economy," Hutchens said.
While U.S. corn and soybeans create renewable energy in the forms of ethanol and biodiesel, fertilizer -- especially nitrogen-based fertilizers such as anhydrous ammonia and urea -- increasingly comes from overseas. Trinidad, which has lower production costs than the United States, is a significant producer.
Last year, the United States imported nearly $1.49 billion in nitrogen-based fertilizer products from Trinidad. The island also exported more than $4 billion in natural gas to the United States. Natural gas, air and steam are used to create anhydrous ammonia.
Farm spokesmen report shortages of potash, as well, because Canada, a prime exporter, is selling more on the world market to countries such as China.
Security issues also affect fertilizer costs. Ammonium nitrate, which makes up about 10 percent of the fertilizer market, is used to make bombs. Tighter government restrictions on the shipment of ammonium nitrate has increased costs and caused some companies to phase out production, Tyler said.
"We are experiencing shortages in all areas for nutrients,"
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