(Bloomberg) — Two crops dominate U.S. farming: corn and soybeans. The former requires massive amounts of fertilizer. The latter requires very little.
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Which is why the astronomical surge in fertilizer prices — they’re up some 27% this year and 130% over the past year — is causing farmers to quickly re-calibrate the amount of each crop they put in the ground this spring. They’ll dedicate about 2 million more acres this year to soy, a Bloomberg survey finds, and about 2 million fewer to corn.
One hundred of the acres in that switch are happening on Tim Gregerson’s farm on the plains just north of Omaha, Nebraska. Gregerson fancies himself a corn guy first and foremost. @CornKng333 is his Twitter handle and he always puts more corn in the ground than soy. But when fertilizer prices spiked anew in January, he decided to bring his corn-to-soy ratio closer to 50-50. And that was even before Russia, the world’s biggest fertilizer producer, invaded Ukraine and sent prices skyrocketing even more.
“Fertilizer is out of control,” Gregerson says.
He rattles off all the other farm costs that are soaring: fuel, machine parts, herbicide, feed for livestock. Of course, crop prices are jumping, too. Corn and soy are both up 22% this year, the result of booming global demand and limited supplies exacerbated by the war. Wheat, the third biggest U.S. crop, is up even more: 31%.
To John Gilbert, this surge in both costs and potential revenue is simultaneously terrifying and exhilarating. “It feels like going down the hill in a truck and picking up speed but not being sure if you can make that corner at the bottom,” he says.
Seeing just how much corn was up this winter, Gilbert had planned to carve out 15 additional acres for it on his 123-year-old family farm near Iowa Falls, Iowa. But, like Gregerson, he decided to go with soy instead when he saw the January spike in fertilizer costs.
The U.S. government is due to release its 2022 crop estimates on Thursday. Some analysts say it’s possible, albeit not likely, that plantings of soy even surpass those of corn. That’s only happened twice in record keeping that goes back almost a century.
As much havoc as the fertilizer market is wreaking in the U.S., it’s even worse in other agriculture powerhouses like Brazil, where farmers are fretting they won’t be able to find as much as they need this year. “Getting fertilizer is going to be more and more of a problem for the world in general,” Gregerson says.
This, in turn, stands to further push up food inflation and add to a surge in global hunger that was triggered by the pandemic and droughts that have parched farmland in Brazil, Mexico, Canada, Russia and the U.S.
Fourth of July
The lack of rain is weighing on American farmers’ minds, too.
Almost all of them bring it up as they lay out the different variables they’re contemplating. Gary Millershaski says the land on his farm in southwest Kansas is “by far the driest I’ve ever seen it.”
He began there in 1988, helping out his father-in-law, and today tends to his corn, wheat and sorghum crops when he’s not serving as chairman of the Kansas Wheat Commission. If the rains don’t come by the fourth of July, he says, he won’t even bother putting down additional fertilizer. Too expensive to waste on a bad harvest, he figures.
“I sure wish we could get some rain,” he says.
There are three main types of fertilizer: nitrogen, phosphate and potassium. Pricing varies greatly, product by product and region by region, but all three are broadly up about one-third in the past three months.
The beauty of soybeans is that, because the green leafy plants put nitrogen back into the ground rather than taking it out, they only need a fraction of the fertilizer that corn gets. In recent years, farmers on average applied 255 pounds of total fertilizer on corn versus just 65 pounds for soybeans, according to Bloomberg’s Green Markets, citing a U.S. Department of Agriculture survey of growers.
At today’s price of $930 per short ton, the nitrogen costs pile up quickly. They come to 45 cents per bushel of corn. That alone equates to 6% of the final sale price on corn. (For wheat, it’s even a bigger chunk — 10% of the sale price.)
Some farmers are unmoved by the jump in costs. They say that with corn fetching as much as it is nowadays, they’re sticking with it.
“Beans have lost value relative to corn,” says Dan Cekander, a fourth-generation farmer in central Illinois. “The corn is starting to scream for acreage.”
Some 200 miles to the south, Kenneth Hartman looks at the equation differently. He’d rather give up a little extra price, he says, and keep his costs down.
“I may not get as much income off the soybeans but at the same time I don’t have the expenses,” says Hartman, who oversees about 4,000 acres in Waterloo, Illinois. He’s shifting 5% of those acres out of corn and into soy. “We are concerned with the costs, because we don’t want to go into the red if we get a poor crop.”
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