No Relief in Sight for High Fertilizer Prices

Experts Urge Better Planning

Chris Torres
Staff Writer

EPHRATA, Pa. — Richard Snyder, a farmer from Lycoming County, has seen many ups and downs since he began farming at the age of 18. Prices have gone up, prices have gone down. Some years are wet, some years are dry.

And a few in between have been perfect.

At the age of 72, he still sees things he’s never seen before.

Like many other farmers, Snyder is enjoying high corn and soybean prices — some of which he has never seen before.

On the outside, it seems he is awash in cash. But higher input costs, particularly in fertilizer, has him tightening the belt, forcing him to plan more than he ever has before.

In this era of $3.50 gas and $4.50 diesel, experts believe good planning is the key to maximize profits.

Fertilizer Prices:
Out of this World
Earlier this year, Snyder locked in his nitrogen fertilizer at $400 per ton. At the time it looked expensive. He was always used to paying much less.

Now at $600 per ton, he considers the price he paid a bargain.

Across the board, the price of synthetic fertilizer has gone through the roof. Dealers are reporting farmers are paying double or even triple the amount they paid last year for the same amount of fertilizer.

Brian Fulmer, a corn and soybean farmer from Northhampton County, just got finished planting his soybeans this week. Liquid nitrogen, which he said he paid $175 a ton for last year, cost him $335 a ton this year.

He locked in starter fertilizer at $350 a ton, only to find out it had jumped to $700 a ton within a matter of weeks.

“In the last two years, fertilizer prices have doubled. I hope the commodity prices don’t go back down, because I don’t know what’s going to happen,” Fulmer said.

The USDA’s National Agricultural Statistics Service (NASS) index of fertilizer prices paid by farmers, which is derived from information from fertilizer dealers, has gone up nearly 200 percent since January of 2000.

Much of the increase has been within the last year.

What’s to blame? According to Penn State ag economist Jayson Harper, high fuel prices and increasing demand are the culprits.

“I wouldn’t be expecting any kind of price relief for the farmer anytime in the near future,” Harper said.

According to The Fertilizer Institute (TFI) based in Washington, D.C., worldwide demand for nitrogen is up 14 percent, while demand for phosphorus has increased by 12 percent and demand for potassium has jumped 17 percent.

Fuel prices meanwhile have been setting nearly weekly records, with gasoline approaching $4 a gallon and diesel well over $4 a gallon.

Natural gas, of which nitrogen is derived, has still not come down from its usual price peaks in the winter, Harper said.

Worldwide demand from countries such as Brazil, China and India is increasing as farmers in those countries turn to more sophisticated ways to maximize their profits.

Phosphorus and potassium are also in high demand but is in short supply.

Along with supply and demand issues, the weakening dollar is also effecting prices. TFI estimates the U.S. imports 50 percent of its nitrogen and more than 90 of its potassium, which comes from potash and is only mined in a few countries.

Since the dollar has fallen in value, it has become more expensive to import these items because, according to Penn State’s Jim Dunn, an ag economist, foreign countries must make up those lost dollars by charging more to get their products.

Dunn also blames a lack of domestic production for the recent price increases.

“The price of fertilizer hardly moved at all for a long long time,” Dunn said. “Until they build some new factories, there is a real shortage.”

Plan, Plan, Plan
Charlie Svec, president of Miller Chemical in Hanover, Pa., a company that specializes in foliar feeding solutions that can be used during the growing season, said farmers must be more business saavy then ever if they hope to maximize on high corn and soybean prices.

“I think every farmer is going to have to be really proactive this year,” Svec said. “This is not business as usual, this is very different.”

That means looking for other solutions, including using more animal manure and relying on alternative forms of fertilizer to get through the season.

Dave Mattocks, president of Fertrell, the oldest producer of organic fertilizer in the U.S., said his business has increased as more farmers turn to alternative means of fertilizing.

“There is definetly a trend in our favor at the moment,” Mattocks said. “I’m getting a lot of farmers saying, ‘this is a good time to make a change.’”

Svec said foliar feeding solutions, while more expensive than nitrogen, are actually seven to 10 times more efficient because a plant will consume a lot more of it than a conventional soil fertilizer.

But they are not immune from price increases. Mattocks said his costs have jumped 75 percent over last year, mostly due to high fuel prices and higher prices for potash.

The fact that less pesticides and herbicides are used in organic operations is a way Mattocks says he can sell his products, since the prices for those materials has also skyrocketed.

“If they look at what we’re offering them, they will see that there is reduced weed and insect pressure,” he said.

Through his dealing with local farmers, Svec is concerned many will exhaust their credit lines from their banks and farm credit organizations because of having to borrow too much money to cover initial input costs and not having enough to cover extra fertilizer costs later in the season. He said that will cost some farmers money, especially those who farm in areas with less fertile soils and need extra fertilizer to get good yields.

Jeff Tyson, senior vice president of Mid-Atlantic Farm Credit, said he is seeing more customers this year borrow money to cover higher initial input costs.

 “I think we are seeing with some of our customers a need to borrow additional working capital to cover input costs. There is some spike,” Tyson said.

But he added the company has not been blindsided by it and is currently working with customers to address their concerns. Bottom line, he said, farmers with good business plans are in good shape.

“There is always a lot of volatile. Getting in a situation where you have quickly rising input costs is not completely foreign to us,” he said. “Certainly it’s a concern when we see these costs rising. But if a farmer has a good business plan, we look at those as opportuniites we can’t say no to.”

Good planning is what farmer Richard Kreider says will get him through this growing season. He farms nearly 300 acres of primarily corn near Myerstown in Lebanon County.

Last fall, he locked in liquid fertilizer prices at $2.70 a gallon.Today, that same liquid fertilizer would cost him over $4 a gallon.

Along with locking in his fertilizer prices, he has also locked in his corn and soybean prices, which he said will guarantee him a profit and give him a little more peace of mind.

“This is what’s going to save some of these fellas, if they locked in prices early,” Kreider said. “The bottom line at this point will not be effected.”

For Snyder, the higher costs of doing business is nothing new and he takes it in stride. He’s already dealing with higher fuel costs to run his tractor and higher food costs to feed his family.

At $6 per bushel corn at 150 bushels to the acre, he estimates he makes about $200 in net profit, when you figure it costs him nearly $700 to produce the corn and he gets about $900 per acre.

He is closely monitoring what the increased costs are doing to his profits but he also keeps everything in perspective.

“It’s sure taking a lot of input costs, but fortunately we got some good prices on corn and soybeans from last year and that’s alleviating some of the sting out of it,” he said. “We’re much better than we were two years ago.”