Farmers, brace for high fertilizer costs — now and for the 2027 crop.
That’s the warning from economists, who say the conflict in Iran is just one piece of a much larger puzzle behind high fertilizer prices.
Gretchen Kuck, an economist with the National Corn Growers Association, said fertilizer prices have remained elevated since 2020 due to tariffs, China’s restrictions on phosphate exports, plant closures and other supply chain pressures.
“If you had asked me in February or December what one of my biggest concerns was for farmer profitability, I probably would have already told you fertilizer,” Kuck said.
Faith Parum, an economist with the American Farm Bureau Federation, highlighted the United States’ reliance on imports for key fertilizer components, including about 18% of its nitrogen, 97% of its potassium and 13% of its phosphate.
According to the Illinois Production Cost Report from USDA’s Agricultural Marketing Service and University of Illinois Farmdoc economists, anhydrous ammonia prices rose $256.59, or 30.4%, to $1,099.50 per ton between Feb. 20 and April 3. The Farmdoc team predicts that anhydrous ammonia prices in Illinois will likely remain high in the fall, with estimates nearing $900 per ton by September.
“Continuation of current prices would make the economics of growing corn, in particular, a bit more difficult,” said Gary Schnitkey, U of I ag economist, who’s also part of the Farmdoc team.
Nick Paulson, U of I ag economist, noted that the conflict in Iran has particularly affected urea since it’s a key product from the Middle East. Urea prices went up $271.50, or 46.7%, to $852.50 per ton during the same time period.
“Even if the conflict was wrapped up in the next couple of days, these higher prices tend to be persistent, and we should be expecting a higher nitrogen price heading into the pricing period for the 2027 crop year,” Paulson said.
Farmdoc advised those applying nitrogen in the spring to follow the Maximum Return to Nitrogen rate recommendations to maximize returns. The MRTN calculator, put together by soil fertility specialists from across the Corn Belt, takes factors such as geographic region, crop rotation, and the price of corn and nitrogen into account.
In addition to fertilizer, diesel prices are up. Between Feb. 20 and April 3, a gallon of diesel rose by $1.45, or 46.2%, to $4.59. Schnitkey said while many farmers have likely locked in diesel prices for planting, the fuel for harvest remains unpriced for many operations.
Start pricing new crop?
High input costs, such as fertilizer and diesel, are putting a strain on farm profitability. Kuck said 40% of survey respondents in September had already planned to reduce fertilizer applications due to the current economic cycle — long before the conflict in Iran began.
“Price is not the whole picture of farmer profitability,” she said, explaining that higher input costs and depressed commodity prices create a challenging environment.
Kuck pointed out that the current situation differs from the aftermath of the Russia-Ukraine conflict in 2022. While input costs were high then, corn at about $8 per bushel helped offset increased costs.
Now, the numbers are less favorable. According to Kuck, based on new-crop corn prices and current fertilizer prices, it would take about 145 bushels of corn to buy 1 ton of urea. In April 2022, near the time of the Russia-Ukraine invasion, it would have only taken 125 bushels. Although urea prices were higher in 2022, higher corn prices helped farmers manage costs.
Since mid-January, corn and soybean futures contracts have experienced steady growth, with minimal impact from the Iran conflict, according to Paulson. He noted that this is due to Iran being a grain importer rather than a producer.
Following the Russia-Ukraine conflict, grain prices spiked because Ukraine is a major grain producer globally. Schnitkey said Iran’s reliance on imports could negatively impact prices if it struggles to bring in crops from the U.S.
Currently, fall cash bids in central Illinois are $4.50 to $4.60 per bushel for corn and $11 per bushel for soybeans, according to Paulson. While corn prices are below breakeven levels — estimated at $4.66 to $4.90 per bushel depending on the region — they are higher than Farmdoc’s initial crop budgets. The estimated breakeven for total costs for soybeans ranges from $10.80 to $11.26.
“I would suggest that maybe this is the time we start pricing some of that new crop,” Schnitkey said. “Even though it’s not necessarily at breakeven levels, it might be some of the higher prices that we see.”