Fall 2023 Fertilizer Update: Big Crop Budget Improvements
When pricing and budgeting for the 2024 growing season begins, producers will notice fertilizer prices are significantly lower and returning to more normal levels. Trending higher after 2020, prices reached new heights after Russia invaded Ukraine in spring 2022. Prices trended lower in the spring of 2023, and after even more declines this summer, big improvements will be noticed in crop budgets.
Budgeted Fertilizer Expenses
Figure 1 shows the expense of a 180-70-70 corn fertilizer blend. This is based on USDA’s reported spring Illinois fertilizer prices and assumes anhydrous ammonia as the nitrogen source. In 2022, the budget expense reached an eye-watering $273 per acre. Just two years earlier, in 2020, the cost was $99 per acre. The last run-up of higher fertilizer prices between 2011 and 2013 resulted in a cost of $160 an acre.
By this spring, the price was down to $202 per acre: a big improvement but still historically high. Finally, after fertilizer prices continued to fall throughout the summer, the expense hit $142 per acre in September.
While not shown, two-thirds of the $131 per acre decline in the cost between spring 2022 and September 2023 came from lower nitrogen prices. Lower phosphorus and potassium prices each accounted for roughly 16% of the decline. Behind the scenes, nitrogen accounted for a majority of the reduction because it is the largest share of corn fertilizer expense (approximately 48%) and anhydrous ammonia prices have fallen the most.
Nitrogen Prices Fall the Most
In recent years, the degree of sticker shock one has experienced has depended on the timeframes compared. Figure 2 shows the change in specific fertilizer prices compared to spring 2023 prices (in blue) and fall 2022 prices (in red). In both cases, nitrogen prices – and especially anhydrous ammonia – fell the most.
When comparing current prices to those a year ago, producers will notice nitrogen prices are roughly 50% lower than a year ago. DAP and potash prices are also lower, with potash more than 40% lower than a year ago.
Wrapping It Up
While fertilizer prices are lower, the associated volatility and uncertainty remain. In June, reported anhydrous ammonia prices were more than $1,100 per ton. By August, prices fell to $585 per ton, a $530 or 48% decrease. By September, however, anhydrous ammonia prices had increased by $100 per ton, erasing some of the price retreat. There are several years where prices have changed less than 10% within a year, let alone a month. These price swings – which could continue – may create headaches within fertilizer supply chains, especially for retailers and wholesalers concerned about inventory being exposed to significant price volatility.
Finally, we noted last spring that urea prices were extremely low relative to other nitrogen sources. In a related article, we found anhydrous ammonia prices have recently closed that gap, but liquid 28% remains relatively pricey (at least in this data set). Read more about relative fertilizer prices and other trends in fertilizer prices here.