What are nitrogen fertilizers?
Nitrogen fertilizers are a key component in field crop production. And by nitrogen fertilizers we mean mineral fertilizers containing nitrogen, both simple and complex. The main nitrogen fertilizers used in agriculture are: urea, ammonium sulfate, ammonium nitrate, MAP and DAP.
Fertilizers make up an average of 36% of a farmer’s operating costs for corn, 35% for wheat and 30% for sorghum, according to estimates from USDA’s Economic Research Service (ERS) Commodity Costs and Returns 2020 data product, released in October 2021.
Given the importance of applying fertilizer to meet yield goals for most field crops, a rapid escalation in fertilizer prices affects a wide variety of farming activities and decisions. Data for Iowa production costs-used as a proxy for U.S. expenses because of Iowa’s central location and its importance in field crop production-indicate a steady decline in fertilizer prices from 2013 through 2017 before gradually rising through 2019.
In late 2021, fertilizer prices began to spike alongside rising prices of natural gas-a primary input in nitrogen fertilizer production. By December 2021, average monthly spot prices of natural gas at the Henry Hub distribution hub in Louisiana, as published by the U.S. Energy Information Administration, were 45 percent higher than in December 2020. U.S. farmers use three primary forms of nitrogen fertilizer: anhydrous ammonia, urea, and liquid nitrogen.
ERS estimates an annual price increase of 235 percent for anhydrous ammonia, 149 percent for urea, and 192 percent for liquid nitrogen (32 percent) using data provided by USDA’s Agricultural Marketing Service (AMS) as of December 2021. Researchers expect the spike in fertilizer prices to affect producer decisions going into the 2022/23 marketing year.