Fertilizer Continues Lower into Spring 2023
By David Widmar
Numerous articles have been written about fertilizer prices trending lower in recent months. The development is a welcome budget improvement for producers, especially those who waited to price or apply 2023 fertilizer. This week, we dig deeper into the fertilizer price data to provide new insights.
Fertilizer Expense Remains High
There are countless ways to measure how fertilizer prices have adjusted lower. For instance, using USDA-reported prices in Illinois, nitrogen prices are sharply lower; anhydrous ammonia prices are 28% lower than in spring 2022, while urea prices are 32% lower. Similarly, DAP (-15%) and potash (-26%) are also considerably lower.
In farm budgets, producers typically pencil out a per-acre cost. Figure 1 shows the expense for a corn fertilizer blend of 180-70-70 . For 2010-2022, the reported expense is based on spring prices (April – May), while the 2023 data considers recent data (March – early April). The good news is that fertilizer expenses have fallen by $67 per acre or 24%.
The not-so-good news is that fertilizer expenses remain stubbornly high. At $207 per acre, current prices equate to the second-highest expense since 2010. For context, the expense was $99 per acre in 2020, and expenses jumped by $133 per acre in 2022 alone.
Urea Cheaper Than Anhydrous Ammonia?
The problem with rapidly changing prices – higher or lower – is that it distorts relative prices. We regularly monitor relative fertilizer prices but were surprised by some of the most recent data. Figure 2 shows the unit price ratio for urea/anhydrous ammonia. On average, a pound of nitrogen from urea is 1.23 times more expensive than anhydrous ammonia. Of course, the product cost isn’t the final consideration when selecting a fertilizer, but the base rate is insightful.
Since the fall of 2021, the price ratio has been mostly below 1.23, meaning urea prices were relatively more attractive. However, urea prices have applied full-court pressure since October 2022 as the ratio hoovers near 1.0. At 1.0, nitrogen from urea is the same price as anhydrous ammonia. But wait, there’s more: for a few weeks in early 2023, the ratio dipped below 1.0, meaning urea was briefly less expensive. At 1.01 in early April, the ratio remains at historically low levels.
While retail and farm-level conditions and considerations will vary significantly, these relative prices are the lowest since 2010. As a result, producers with flexibility might be able to capture additional budget savings.
Wrapping It Up
Given the timing of when prices turned sharply higher (fall 2021) and began to lower (winter 2022), not every 2023 crop budget will have lower fertilizer prices. That said, the current situation is hopeful that fertilizer prices will remain below the recent highs.
Still curious? Check out the recent AEI Premium articles that dug even deeper into recent fertilizer prices, and consider what current conditions suggest about future nitrogen prices.
 Assumes anhydrous ammonia as the nitrogen source.