Each week, Rep. Frank Lucas, R-Okla., strolls the marble floors of Congress, attending hearings, visiting with constituents and developing legislation.
The farmer side of him, however, flashes back to the Oklahoma farm that he and his wife, Lynda, operate. Like you, the Lucases have wrestled with spiraling fertilizer costs.
“Lynda and I use our wheat crop to typically graze out [cattle], or hay it to supplement the cattle,” he told members of the North American Agricultural Journalists at the group’s annual meeting in mid-April in Washington, D.C.
However, drought coupled with high fertilizer prices prompted the couple to nix nitrogen applications to spur spring wheat growth this year.
“So, not only is that green forage not there, but it also means the cows will weigh less because they won't have the same intake,” Lucas said. “It also means my local fertilizer dealer will not sell me the product and make his small margin off it. It just sets off a chain reaction down through the line.”
You aren’t alone
That’s just one example of how the current price squeeze is impacting farmers.
“Commodity prices today, compared to where they were in 2022, have declined 30%, 40%, 50% in some cases,” said John Newton, vice president of public policy and economic analysis for the American Farm Bureau Federation.
However, that’s only one part of the equation. Others include:
1. High inflation dating back to the COVID-19 pandemic. Along with almost every product, inflation that’s occurred since the pandemic has boosted the price of agricultural inputs. Temporarily, this was palatable for some farmers.
“During Russia's invasion of Ukraine in 2022, you saw a run-up in grain and oilseed prices, which made the higher input cost environment more manageable for farmers,” Newton said.
Not now.
“Certainly in 2022, we had very high nitrogen prices,” said Joe Glauber, senior research fellow with the International Food Policy Research Institute. “We had high potash prices, high phosphate prices. But crop prices were a lot higher then. So, the margins were better then, even with the high fertilizer prices.”
2. The war in Iran. “Since that time in early March, diesel prices have gone through the roof,” Newton said. “Fertilizer prices are up 30% to 40%, and it comes at a time when farmers are putting seed in the ground, and they need to apply that fertilizer at just the right time in just the right amounts. And there are a lot of farmers across the country that have the challenge of accessing the fertilizer they need.”
Not all producers are equally impacted by the recent spike, such as those who bought and applied a share of their fertilizer last fall, or prepaid before the war-induced price spike. But even those farmers may be affected if they did not pre-pay for later-season fertilizer additions this growing season.
“There’s been a lot of talk about folks switching acres,” said Gretchen Kuck, a National Corn Growers Association economist.
Still, that’s not an easy decision. For example, soybeans have their own export, supply and price complications.
3. Lack of investment in domestic fertilizer production. Spurring domestic supply to alleviate dependence on foreign fertilizer would be a way to lessen future shortages and price shocks. Still, that will take time and dollars.
Newton recalled a move in 2022 by the Biden administration to tap an amount close to $500 million to spur domestic fertilizer production.
“I remember I was with Sen. [John] Boozman, R-Ark., at the time, and it’s like, ‘What’s $500 million going to do?’ We’re [now] in a similar situation. These are billion-dollar problems.”
Newton said he believes the problem is rooted in overregulation dating back 15 years ago.
“The business environment [at that time] wasn't suitable to make the type of capital investment needed to build and increase fertilizer production here in the United States,” he said.
What the feds are saying
Several federal legislators have co-sponsored the Fertilizer Transparency Act. Sponsors have said the legislation would create a mandatory price-reporting system to offer market participants of all sizes comparable levels of market information on fertilizer components.
Sen. Amy Klobuchar, D-Minn., also is co-sponsoring the Homegrown Fertilizer Act with Sen. Roger Marshall, R-Kan., that will create a grant and loan program to expand the domestic fertilizer production and improve fertilizer storage capacity.
At the NAAJ meeting, USDA Deputy Secretary Stephen Vaden called out fertilizer giant Mosaic for its April 8 decision to idle two plants in Brazil. Together, those facilities produce about 1 million metric tons of phosphate. The Department of Justice is already pursuing an antitrust case against major fertilizer producers, although few details of the case have been made public.
In the end, however, it’s time to think strategically about how to boost domestic fertilizer production, Newton said.
“There are a lot of questions that we just don't have the answers to yet, but a token investment of a few hundred million [dollars] is not going to get us out of this problem,” he said.