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Influenced by a global market, fertilizer prices have spiked since last fall, with phosphorous and potassium — two of the three primary chemicals needed to grow corn — more than doubling in cost. And with fertilizer accounting for 40 percent to 60 percent of corn growers’ variable yearly costs — things such as seeds, herbicides and fuel — that’s hurting their bottom lines.
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Fertilizer is applied to alfalfa at Brook View Farms near West Salem Tuesday by Carl Peterson with Melrose Farm Service. Farmers are paying double to triple of what they paid for fertilizer last year and it’s eating into their profits.
PETER THOMSON photo
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Corn for delivery in July 2008 closed Monday at more than $6 a bushel on the Chicago Board of Trade. That’s more than double the price for most of this decade, but farmers aren’t exactly rejoicing.
“We aren’t any better off than we were five years ago when corn was $2 (a bushel),” said Bill Freise, who plans to grow about 1,500 acres of corn and another 400 of soy beans near Melrose, Wis. “Basically, our business isn’t any different than anybody else’s. If you double the input cost, it’s going to have an effect.”
In fact, farmers are worse off, according to a study released Monday by the National Corn Growers Association, which shows fertilizer prices outpaced corn since 2000.
Higher fertilizer prices have made life tough for livestock farmers, too.
Lynn Sedelbauer is a partner in Trinity Farms in Hixton, Wis., where much of the grain grown on 6,500 acres goes to feed dairy heifers and hogs.
“I’m not getting $5 for corn putting it into cows,” he said.
Sedelbauer can increase his fees for raising cattle, but not fast enough to keep up with the rapidly climbing costs in the past two years.
Transportation costs bear some of the blame for higher fertilizer prices, but the primary factors are global competition and a weak U.S. dollar. Industry experts say global demand for nutrients will continue to grow in the coming years, likely keeping prices high.
“China and India are finding out they like chicken and pork and beef,” said Jeff Kuhn, general manager of Winona River and Rail, which distributes fertilizers to sellers in Minnesota, western Wisconsin and northern Iowa. “There’s a lot of mouths to feed.”
American farmers are expected to plant fewer acres of corn in favor of soybeans this year, but even though fertilizer costs are lower for soy, the economics are the same, Freise said.
Freise said his biggest frustration is having to buy his fertilizer months in advance in order to lock in a lower price and ensure he will have it when he needs it.
“It doesn’t do me any good if it’s sitting in the Gulf of Mexico,” he said. “Everything is timing.”
That presents cash flow problems, especially when he can’t lock in a price from grain traders.
The chemicals he plans to put in the ground this spring were paid for last winter, and now, Freise said, he’s preparing to buy for 2009. “I don’t even have this year’s crop in the ground, and I’ll be buying the inputs for my next year’s crop.”
Joe Blow wrote on Apr 20, 2008 10:08 AM: