How fertilizer prices dropped by half – How fertilizer prices dropped …

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Ag retailers in Illinois were offering fertilizer prices this fall at nearly half what they were a year ago. Why and how? Here’s a look, plus what to look for next.

Picture of Holly Spangler
Holly Spangler
September 22, 2023

6 Min Read
A farmer working with agricultural machinery
FERTILIZER VOLATILITY: Nashville, Ill., farmer RH Habbe has honed his fertilizer use with variable-rate technology and more soil and tissue testing during the same period that fertilizer prices skyrocketed and have now fallen by nearly half the price quoted by Illinois ag retailers a year ago. PHOTOS BY BETTY HAYNES
At a Glance
Farmers are relying more on soil and tissue testing to apply fertilizer for profit, not yield.
Fertilizer prices are down by nearly half in some Illinois locations, following two years of natural gas supply volatility.
Locking in 2024 input prices and hedging grain sales will help farmers manage future demand volatility.
Like a lot of farmers, RH Habbe has spent the last few years diling in his fertilizer program. Habbe farms the clay soils south of Nashville, Ill., and he’s switched to liquid fertilizers, uses variable rates to apply dry fertilizer, and tissue tests to see what the crop really needs.

“Long story short: We’re trying to maintain the soil, not build the soil,” Habbe says, adding that he’d like to avoid overapplication to avoid future regulations, like broadcast of phosphorus products.

Strategically, he’s fertilizing for profit, not for yield.

That means on his corn ground, he’s variable-rate applying DAP and potash just before planting, following with 8-24-14 with micronutrients at planting, and then tissue testing in the summer to determine the foliar feed mix he’ll apply with fungicide. Soybeans are similar, except for a 3-18-18 in-furrow. On winter wheat, he’s still using 100 pounds of DAP, 100 pounds of potash and 100 pounds of AMS.

“That’s how we’ve been trying to save, instead of going out and applying 200 pounds of DAP the old-school wayand then only have about 20% that’s available right away,” Habbe says.

Habbe credits Parker Timmons, Southern IL Ag Solutions, for saving him money with better fertility science in recent years — timely knowledge given the fertilizer price roller coaster of the past three years.

The downhill slide
Indeed, fertilizer prices are down 42% in the past year, in part because of skyrocketing costs following unrest in Europe, Ukraine and Russia.

Fertilizer volatility started in late 2021, when Russia threatened to cut off natural gas to Europe, where it had a lot of legacy infrastructure for making anhydrous ammonia from natural gas, says Kreg Ruhl, vice president of crop nutrients for Growmark. And that wasn’t just an agricultural problem. Of the nearly 200 million tons of ammonia that’s produced annually, only 4 million are used for the anhydrous ammonia we’re familiar with for growing food. The rest goes into other fertilizers and industrial uses such as dynamite, gunpowder, nylon, plywod glue and nearly every plastic we use.

“That really kicked the prices off,” Ruhl explains. Then Russia invaded Ukraine, grain couldn’t get out of Ukraine, and there were worries of food shortages in North Africa. Then Belarus was sanctioned, and that slowed the supply of potash that comes from Russia and Belarus — and put pressure on Canada to supply the rest of the world with potash.

That drove potash prices higher, plus ammonia goes into making all the upgraded fertilizers like ammoniated phosphates, pushing those prices higher.

“That was the setup of why everything got high,” Ruhl says, adding that in a nutshell, Russia and Europe struggled over natural gas, and the rest of the world couldn’t flex to meet both agricultural and industrial demand.

What’s changed since then? It’s mostly good news.

“We’re two and a half years into that unrest,” Ruhl reports. “North Africa hasn’t starved. The Europeans have invested in their infrastructure to import liquified natural gas, so they dn’t have to be as reliant on Russia.”

Other parts of the world increased production, and prices are lower now after two years of “demand destruction” due to exceptionally high prices. Areas of marginal production couldn’t afford high-priced fertilizer, so they bought less. And globally, Ruhl says, people are more confident about getting the natural gas they need to make what they need.

“That has brought back a significant resurgence of demand,” he explains. “For those two years when prices were really high, people didn’t buy. The channel cleared out because retailers didn’t want to carry what people didn’t buy.

“Now prices have reset, and demand has come back with a scream.”

Nitrogen demand held steady, Ruhl says, because you have to apply it every year.

“P and K is where you’ll see the big rebound, because for two years, people mined soil reserves,” he says. Growmark supply-chain experts are gearing up for a big fertilizer season heading into the 2024 crop year, as they replenishall their fertilizer channels.

“Everything we can get in before the next crop planting will get used,” Ruhl predicts.

a farmer standing in front of machinery
PRECISION FERTILITY: RH Habbe says he’s cut broadcast rates and moved to variable rate on fertilizer applications. “That’s how we’ve been trying to save, instead of going out and applying 200 pounds of DAP the old-school way and then only have about 20% that’s available right away,” he says.

What to do?
Jacqueline Holland, grain market analyst for sister publication Farm Futures, says several factors will continue to shape fertilizer prices, including:

Ongoing issues with Russia haven’t completely constrained nitrogen supplies coming out of the Black Sea region.

High natural gas prices in Europe could alter production plans this fall.

China has a new export ban on urea fertilizers. The country accounts for 30% of global production and is the world’s largest urea producer.

China’s move will constrain purchasing power for coutries reliant on fertilizer imports, especially large producers like India and Brazil.

Large fertilizer producers like Nutrien have halted expansion plans following the rapid price drop over the past few months; Nutrien has axed plans for a “green” ammonia plant in the Gulf of Mexico and further potash mining in Canada.

Holland says fertilizer decisions should always be a two-step process:

Step 1. Pencil out nutrient needs and breakeven costs. If prices are profitable, lock in 2024 pricing with your ag retailer.

“You wouldn’t be alone — our Farm Futures August 2023 farmer survey found that 50% of next year’s crop inputs are expected to be locked in by Nov. 1,” Holland says.

Step 2. Don’t lock in expenses without hedging revenues.

Farmers know futures prices have taken a hit for 2024, as the market believes the 2023 corn crop is bigger than expected. “Consider utilizing futures and/or options contracts, or even advance sales to ensure that your 2024 costs are covered — even beforeyou harvest 2023 crops,” she recommends.

In the end, we’ve seen massive pendulum swings, Holland says, and the market will always respond robustly to them.

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