Local Fertilizer Cost Hikes Modest Nitrogen Shortage Triggers Increase In Fertilizer Prices
Grass may grow greener, but wheat may not necessarily grow faster on the other side of the world.
While Inland Northwest farmers grumble over a modest increase in fertilizer prices, a nitrogen shortage has foreign farmers paying up to 30 percent more for fertilizer on the international market.
“Most people around here were hearing the horror stories about what increases could potentially be,” said Fred Morscheck, regional manager of McGregor Co., which sells agricultural fertilizer and chemicals.
“I think they were happy to find out that their increase was only in the 15 percent range. They weren’t happy by any means, but it could have been worse,” he said.
A combination of reduced supply and increased demand is responsible for the shortage of nitrogen, the chemical building block for most fertilizers.
Nitrogen production was once heavily subsidized in countries such as Mexico and the former Soviet Union. That meant lots of low-cost nitrogen on the world market.
Those nations have reduced or eliminated subsidies, resulting in less production. At the same time, China and India are ordering huge amounts of fertilizer to increase crop yields.
“World demand has outstripped supply,” Morscheck said.
But in Eastern Washington and North Idaho, the shortage has not induced a panic. In fact, local farmers have been using less nitrogen-based fertilizer for the past several seasons anyway, due to low moisture conditions and diminished domestic nitrogen production.
“There may be a slight decline in fertilizer use due to higher prices. But in general people were using bare minimums anyway,” Morscheck said. “Growers haven’t reduced their use directly because of the nitrogen squeeze.”
Another reason Northwest farmers are paying 15 percent rather than 30 percent more is because area fertilizer distributors have absorbed much of the price increase. Because local farmers are already using fertilizer sparingly, sellers know that farmers are not willing to pay as much as they would if they depended on high volumes of fertilizer.
“We’re not passing on the same percentage increase. We’re getting less return on fertilizer, but it’s a good move for the industry,” Morscheck said.
Although domestic nitrogen plants will most likely crank up their output to increase worldwide supplies, the current shortage may keep worldwide prices high for several seasons.
“Plant outages disrupted the supply chain. Once you lose that production, you can’t make it up. It’s lost,” said Ray Frey, regional agronomy sales manager at Cenex/Land O’ Lakes Agronomy Co.
At the same time, worldwide and domestic production of corn - a crop that uses about 45 percent of domestic nitrogen stocks - might be on the rise. Given the current nitrogen dearth, a bumper crop of corn may further strain the worldwide demand for nitrogen, Frey said.
“It’s a complex issue,” Frey said. “There’s not any one thing that can account for the shortage.”