A Summary of the 2022 Fertilizer Situation

By David Widmar


There have been countless headlines and articles about record-high fertilizer prices in 2022. We don’t want to rehash those tired, gloomy headlines but instead want to share a few managerial insights often overlooked.

New highs, but not completely unprecedented

Figure 1 shows the reported price of anhydrous ammonia, DAP, and potash in Illinois. Anhydrous ammonia recently exceeded $1,600 per ton, considerably higher than the fall 2008 highs of $1,200 per ton. Current DAP prices are nearly $1,000 per ton, which previously hit a high of $1,200. Finally, potash prices are around $850 per ton, slightly behind the 2008 highs of more than $900.

While anhydrous ammonia prices – and other nitrogen fertilizers – have reached historic highs, it’s worth keeping in mind that there have been three significant run-ups in fertilizer prices in the last 15 years.

If fertilizer prices were to adjust lower, would it be quick and abrupt, or take several years to adjust? The past 15 years of data would suggest both scenarios are possible. Between 2008 and 2009, fertilizer prices abruptly adjusted as anhydrous ammonia fell from $1,200 per ton to nearly $400 per ton a year later. Fertilizer prices again peaked in 2013 but then slowly adjusted lower over the subsequent years. For instance, the price of anhydrous ammonia hit nearly $900 per ton in 2013 and didn’t fall to $400 per ton until late 2017.

Figure 1. Illinois Fertilizer Prices, Jan. 2010 – Aug. 2021. Data Source: USDA’s AMS.


Expense per acre

Fertilizer prices are reported for each product, but producers typically budget fertilizer as a collective category. Figure 2 shows the estimated corn fertilizer expense – dollars per acre – for a 180-70-70 blend. Specifically, these prices are based on the average product prices in the spring months. These data allow us to meaningfully size up the situation.

For 2022, corn fertilizer expense is estimated at $273 per acre. This price is nearly double the 2021 expense of $140 per acre. Two-thirds – or $100 per acre worth – of the higher expense came from nitrogen (specifically anhydrous ammonia). Higher potassium (DAP) and phosphorus (potash) prices each contributed $25 per acre in additional expenses.

Taken one step further, the nearly $150 per acre increase could also be considered on a per bushel basis. Assuming a corn yield of 180 bushels per acre, the change in fertilizer prices from spring 2021 to spring 2022 is equal to $0.83 per bushel.

What is a normal corn fertilizer expense? From 2016 to 2020, the expense was around $100 per acre. Between 2011 and 2013 – the last time fertilizer prices were high – the expense was around $160 per acre. Although not shown, the fertilize prices in the fall of 2019 (Figure 1) equated to $252 per acre in expense. In short, fertilizer prices and expenses have experienced a significant variation over the past 15 years.

Figure 2. Corn Fertilizer Expenses, Illinois Reported Prices. Data Source: USDA’s AMS and aei.ag calculations.


Relative prices

From a practical perspective, one of the biggest challenges of rapid changes in prices – be it fertilizer or inflation in the broader economy – is the disruption in relative prices. This is to say large price changes typically wreak havoc on the relationships among substitutes and complements.

Thus far, we’ve focused on anhydrous ammonia as the source of nitrogen fertilizer, but the USDA data also includes prices for liquid 28% and urea.

Before jumping into the data, keep in mind there are many ways to consider fertilizer prices:

  1. $/ton – the USDA data report the price of each product on a dollar per ton basis.
  2. $/lb. of nitrogen – since a ton of urea and a ton of anhydrous provide different amounts of nitrogen, it’s also common to report nitrogen prices on this basis.
  3. Relative prices – admittedly not common, we find it helpful to look at the relative prices of nitrogen products. This is done by dividing the “$/lb. of nitrogen” price of two fertilizers. For example, the average relative price of urea/NH3 is 1.24, which tells us that the price of a pound of nitrogen from urea is, on average, 1.24 times more expensive than from anhydrous ammonia (NH3).

Figures 3 and 4 show the relative prices of urea/NH3 and 28%/NH3, respectively. Again, these graphs aren’t reporting the price per pound of nitrogen but take the data one step further to consider relative prices.

Urea prices, relative to anhydrous ammonia, are low and, in recent weeks, fell to a 12-year low of 1.03. This means a pound of nitrogen costs roughly the same between the two products. As mentioned before, a pound of nitrogen from urea is typically 1.24 times that of anhydrous ammonia.

Figure 3. Relative Nitrogen Prices, Urea/NH3. Data Source: USDA’s AMS and aei.ag calculations. Average: 1.24.


Similarly, the relative prices of liquid 28% are also historically low compared to anhydrous ammonia. The average price ratio is 1.36, but in recent weeks also hit a 12-year low of 1.12.

Figure 4. Relative Nitrogen Prices, 28%/NH3. Data Source: USDA’s AMS and aei.ag calculations. Average: 1.36.


Just as noteworthy is that last fall, these price ratios were at the other end of the spectrum and unusually high. This is to say that, in addition to fertilizer prices turning higher, anhydrous ammonia went from being relatively cheap to relatively high priced over the last six months.

Of course, the current situation could revert to the long-run average by 1) anhydrous prices falling or 2) liquid 28% and urea prices increasing. Producers should carefully consider relative prices while 1) reviewing 2022 fertilizer costs and decisions and 2) beginning to make plans and considerations for the 2023 growing season.

Wrapping it up

Admittedly anecdotal, we’ve already heard fertilizer pricing conversations for the 2023 growing season. The combination of high prices, supply chain concerns, global uncertainty, and broad inflation can be a powerful catalyst in the sales processes. To that point, these factors aren’t limited to fertilizer.

It’s nearly impossible to consider what the next 6 to 18 months will have in store, but keep in mind the current situation is a function of 1) high corn prices, 2) high energy prices, 3) self-imposed countervailing trade dispute tariffs the U.S. enacted in 2021, and 4) the global uncertainty and sanctions around Russian goods. Any one of these factors alone would likely push fertilizer prices higher, and the combination unfolding over the last 12 months has made for a wild ride.

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