Fertilizer Prices About to Eat All of Your Profits?

    January 21, 2022

    Ryan Stockwell is a Wisconsin farmer who helps farmers solve problems on their farms with Carbon by Indigo.

    Before I turned 16, I started working for my uncle on his farm down the road. It was my first “off-farm” job, well, at least off of the home farm, anyway. That didn’t mean I was off the hook for completing my chores of feeding and caring for the heifers at our own farm. The $8 per hour wage was considerably higher than the $5 per hour I was getting at home, so I was incredibly excited to see that first paycheck. My excitement quickly turned to frustration. I learned of FICA and taxes that day, a lesson we all have learned. There are three certainties in life for farmers: taxes, death, and rising fertilizer prices during strong commodity prices.  

    We can avoid getting caught in the trap of rising fertilizer prices.

    Commodity prices have been good the last couple of years, and, as certain as death and taxes, fertilizer prices climb during cycles of high commodity prices. Throw in pandemic supply chain issues and some weather-induced fertilizer plant shutdowns and we have the makings of not just frustrating certainties in life, but fertilizer price increases rising so fast that growers have the very real potential of losing money in 2022 despite some of the highest commodity prices in 10 years. Compounding this very real reality is the fact that fertilizer prices can take a little time to follow commodity prices back down. That means that in 2022 or 2023, growers could face the double punch of lower commodity prices, but with higher fertilizer prices, resulting in a large portion of growers producing crops at a net loss and a chunk of producers experiencing significant losses. Another potential struggle is the simple availability of fertilizer inputs. Some growers contacting input suppliers to lock in supply or prices for the upcoming season are finding no such guarantees possible, leaving some wondering if they will even get needed crop nutrition this year.

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    You have to start now to put your farm in a position to get out of the fertilizer price squeeze and gain some independence from supply chain struggles. As growers, we face three basic realities when it comes to fertilizer use:

    1. Our practices can significantly impact the amount, availability, and waste of fertilizer. Soils that experience erosion above two tons of soil loss per acre are often losing significant amounts of fertilizer and the most fertile soil. Similarly, soils with compaction can cause denitrification. Saturated soils can lose over half of all applied nitrogen. Tillage provides a very short-term solution to compaction but will then perpetuate future compaction issues by further breaking down soil structure.
    2. Soil health will determine how much fertilizer is actually available to crops. Applied N and P must often get converted into plant available usable forms. This process relies on soil microorganisms. The more microorganisms available, the more applied fertilizer is available to crops. Conversely, reducing soil biology through tillage, residue removal, and fallow periods will reduce soil biology. And if it isn’t converted for plant use, it often gets lost to leaching, erosion, or denitrification.
    3. Free nitrogen is available, if you choose to take advantage of it. Legume cover crops such as red clover, Austrian winter pea, and hairy vetch can provide significant plant-available nitrogen. For example, a red clover interseeded into wheat can provide up to 80 pounds of nitrogen to the following corn crop. But it isn’t just legume covers that can provide free nitrogen. Grass covers such as cereal rye can hold onto nitrogen that would otherwise get lost to leaching, erosion, or denitrification and will then release the nitrogen (again in plant available form) as the next crop’s needs ramp up throughout the growing season. 

    While death and taxes are certainties, we can avoid getting caught in the trap of rising fertilizer prices.

    This article contains perspectives from a third party source. A number of variables can affect outcomes on any particular land. Indigo does not guarantee any results with respect to agronomic outcomes, soil health, financial or profitability outcomes, carbon dioxide equivalents sequestered, carbon credits generated or amount or eligibility of payments with respect to any individual landowner or operator. Each participant should carefully consider their own particular situation before adopting any practices and should not rely solely on the information provided in this article.

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