On average, about 21 percent – or about $196.50 – of input costs to grow an acre of corn is expected to be spent on fertilizer in 2023.
The cost is down 3 percent from 2022.
“The price situation is on everybody’s mind,” said Bill Lazarus, University of Minnesota professor and Extension economist.
Fertilizer prices surged due to the war in Ukraine and trade disruptions with Russia. In addition, Federal Reserve policies that responded to COVID in 2020 caused a big increase in the money supply.
“That takes about a year or two for a change in the money supply to ripple through the economy, which is about the right timing for the bump up in fertilizer prices,” he said. “It’s hard to sort out how much of the fertilizer price fluctuation was due to inflation, and how much is due to the Ukraine-related trade disruptions.”
Corn fertilizer production costs
Lazarus examined the costs to produce corn using Minnesota Farm Business Management FINBIN data. From 1997 to 2021, the total cost per acre more than doubled – from $324 per acre in 1997 to $777 per acre in 2021.
Focusing on fertilizer, the records showed that fertilizer and lime amounted to 15 percent of the total ($48.60 per acre) in 1997 vs. 17 percent ($132.09 per acre) in 2021.
He estimates that Minnesota farmers spent 24 percent ($231.60) on average on fertilizer in 2022 to raise corn (total cost of $965 per acre) based on price changes reported by the USDA National Agricultural Statistics Service.
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For 2023, he estimates fertilizer and lime will be 21 percent ($196.56) of the total cost ($936 per acre) of raising corn.
The prices for anhydrous ammonia, diammonium phosphate, and potash all rose beginning late in 2020. Early in 2022, anhydrous got up to nearly $1,600 per ton. Urea topped $1,000, MAP reached over $900, and potash reached $800.
Anhydrous has since moved down to $1,200. MAP is below $900, and potash is down to below $700 (as of late February 2023).
Lazarus and his colleagues have used models to predict nitrogen demand and supply factors affecting the price of nitrogen.
“It would put us a year from now (2024) at about $1,000 per ton, and that would suggest what ammonia prices are going to be if the model is somewhere near accurate,” he said. “That’s assuming that inflation would move down from 5 percent to 4 percent a year from now. A slight reduction in the crude oil price and corn a little under $6 in the fall of 2023 would be consistent with that.”
A similar model would put the price of urea a year from now at around $675 per ton.
Lazarus encourages farmers to look at the maximum return to nitrogen ratio (MRTN) to see how that ratio is affected by corn prices.
“The diminishing returns have a little bit of an impact there, but they are still not a big change,” he said.
He also suggests looking at the price of corn when making decisions about fertilizer purchases and use. Estimates from the USDA indicate the average corn price for 2023 is $5.70 per bushel.
Moving beyond 2023, USDA’s long-term projections have the corn price declining to around $4.30 per bushel over the next few years.
“That kind of price change is probably going to take some getting used to,” he cautioned. “One management recommendation with the input costs being as high as they are – that we try to lock in the corn price for as much of the crop as we can – just in case there is a decline.”