Fertilizer Markets: The Clash between Energy, Ag, Weather, Profits, and Policy

Abstract

Over the past 18 months, many prices have been on the rise. The general economy is facing its first significant bout with inflation in roughly 20 years. Agricultural commodity prices are high, with crop prices doubling over the time frame. While agricultural producers have enjoyed increased revenues with the boosted prices, they are now also facing increasing costs as the prices for agricultural inputs rise—agricultural land values (and cash rents) have soared and herbicide and pesticide costs have increased. However, the agricultural input with the most dramatic price rise has been fertilizer. US agriculture relies on a strong base of row crop production, with corn being the leading crop. To produce the high yields required to match global demand for corn, US corn production is highly dependent on fertilizer, including nitrogen, which is an essential nutrient for growing corn. Recently, anhydrous ammonia prices increased substantially, from $290 per ton in June 2020 to $1,350–$1,375 per ton in January 2022.