Skip to Content

Financial Impacts of Higher Fertilizer

Below is an article about the Financial Impacts of Higher Fertilizer prices by Steven Klose, Professor and Extension Farm Management at Texas A&M Agrilife Extension and J. Marc Raulston, Associate Director, Agriculture and Food Policy Center at Texas A&M. This information was posted on the Southern Ag Today website.

Last week we looked at the basic supply/demand factors contributing to the surge in fertilizer prices.  The abnormally high fertilizer market prompts the question:  How much of a financial burden do these prices represent for producers?  Today we are highlighting a study attempting to address that very question.  The Agricultural & Food Policy Center (AFPC) at Texas A&M maintains data on 64 representative crop farms across the U.S.  The data, provided by the consensus of local producer groups, describes the capital structure and operating parameters necessary to forecast a financial outlook for each representative farm.  The basic idea of the study was to impose higher fertilizer expense on each farm and compare the bottom-line results for a 2022 outlook with that of a baseline scenario (a fertilizer market without the current surge in prices expected in 2022).  Here’s the link to the full paper:  Economic Impacts of Higher Fertilizer Prices on AFPC’s Representative Crop Farms.

As a baseline, the study assumes the market outlook as described by the Food and Agricultural Policy Research Institute (FAPRI) August 2021 Baseline for commodity prices and cost inflation.  In the baseline, fertilizer price inflation estimates in 2022 were 9.9% for Nitrogen (N) and 13.6% for Phosphorous and Potash (P & K).  Based on estimates of spot prices observed at the time of the study, the alternative higher cost scenario assumed inflation factors of 55.4% for N and 50.8% for P&K.  Results outline the total impact to each farm’s NPK costs for 2022.  Alternative inflation assumptions result in an approximate 37% higher fertilizer bill for all farms.  For 25 feed grain farms, the average increase in fertilizer cost for 2022 was $128,000 (or almost $40/acre over the baseline scenario).  Rice farms saw the highest per acre increase with an average across 15 farms of roughly $62/acre.   Both cotton and wheat farms would experience near $100,000 higher total NPK costs on average or approximately $30/acre and $20/acre, respectively. READ MORE

Leave a Reply