Fertilizer Costs - Increasing Rapidly

October 02, 2008

The cost to fertilize an acre of corn in the Midwest for 2009 is estimated to be $230 per acre. This is a dramatic increase from last year’s cost of $122 per acre and the 2007 cost of $87 per acre. There are several reasons for this increase in cost. Fertilizer is basically a combination of nutrients added to the soil to help plants grow. The three most important are nitrogen, phosphorous, and potassium or N-P-K.

Nitrogen (N) (82-0-0)

The air is 80% nitrogen. Energy, mainly natural gas, is used to convert atmospheric nitrogen to usable forms such as ammonia and urea. With the high cost of natural gas in the U.S., domestic production has dropped from where it has supplied 85% of U.S. needs. Now, over 60% is imported. Trinidad and Tobago Republic provide most of our ammonia with Canada, Russia, and Ukrane as major suppliers. New plants are being built in oil producing countries--Iran, Egypt, Nigeria, Oman, and Russia.

Phosphorous (P) (18-46-0)

Comes from mines from ancient sea life. Most of the fertilizers are produced in the United States, Morocco, and the Baltic Sea. The U.S. is the largest exporter of phosphate.

Potassium (K) (0-0-60)

Comes from mines from evaporated oceans. Over 90% of potash is imported. Canada is the top producer of the world’s potash followed by Russia and Belarus.

Global Demand

Overall global consumption of fertilizer increased an estimated 31% from 1996 to 2008 driven by a 56% increase in developing countries. The overriding factor in the increase in demand for fertilizer is the growing demand for food. With world economic growth at a brisk 5% a year, hundreds of millions of people (mainly in the developing countries of China, India, and Brazil) began earning enough money to better their diets in the quest for healthier lives. The increase in demand for food occurred at the same time as rising production of bio-fuels. The amount of corn used for ethanol has increased from one billion bushels in 2002 to three billion bushels in 2007. Farmers planted more corn to meet the demand for fuel, increasing the demand for fertilizers.

High Energy Prices

Transportation costs have increased due to high energy prices. Much of the fertilizer applied in the U.S. comes from foreign countries; transportation costs are a large component of the cost of fertilizer. Ocean freight rates are up due to strong demand for vessels and the cost to operate them. Rail transportation has increased due to fuel costs, safety requirements, and liability concerns. Barge rates are higher for the same reasons. Truck rates are significantly higher due to the high cost of fuel. The cost of natural gas accounts for 70-90% of the production costs of ammonia. Ammonia is also used in the manufacturing of rock phosphate. Mining and processing of rock phosphate and potash is energy intensive. The cost of natural gas has increased along with the cost of other energy sources.

Declining Value of Dollar

The value of the U.S. dollar has fallen significantly in the past few years increasing the cost of goods we import. The U.S. imports over 60% of its nitrogen and over 90% of its potash. Most fertilizer materials are priced in U.S. dollars. Foreign producers have to raise the price of fertilizer in U.S. dollars to offset the decreased value of the dollar to maintain the revenue they receive in local currency.


With the recent economic crisis, commodity values (including corn and oil) have dropped significantly, and the dollar has gained strength over foreign currencies. We expect fertilizer prices will decline, however, this will take some time as the fertilizer market is not structured around a formal centralized trading system.

We keep abreast on many of the current issues facing rural landowners, these trends and topics are highlighted in our “Field Notes” newsletter. Below are some key topics for owners and farmers.