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Source: by David Widmar, Agricultural Economics Insights

To view the complete report, click here.

The USDA's AMS regularly reports farm-level fertilizer prices in Illinois. Figure 1 shows how much average reported prices have changed since last spring (April - May 2020) and last fall (September - October 2020). Across the board, all fertilizer prices are higher in 2021, but the range is quite broad.

While nitrogen often gets the most attention, phosphorus prices are up the most. For example, DAP prices are 57% higher than last spring. (Spoiler alert: phosphorous prices are key).

For nitrogen, the degree of sticker-shock depends on the product and time frame considered. For example, anhydrous ammonia and urea are up 37% from the fall, but considerably smaller increases (+17% for anhydrous ammonia and +25% for urea) over Spring 2020. Furthermore, prices for liquid nitrogen are only up 9% over last year.

Figure 1. Change in Select Illinois Fertilizer Price from Last Spring and Last Fall. Data Source: USDA AMS.

What is Driving Fertilizer Prices Higher?
One final point to note: overall, fertilizer expense is up $29 per acre than last spring, or 30% higher. While nitrogen seems to get more of the attention, phosphorus fertilizers account for a majority of the higher expense. Based on this example, higher DAP prices accounted for nearly $18 of the $29 increase (or, 61%). Anhydrous ammonia accounted for only $8 (or, 28%).

Wrapping it Up - Prices Are Up, But Here's Some Context
The upturn in fertilizer prices has been dramatic. Further complicating the situation has been the whiplash of prices dramatically falling a year ago. The combination makes it hard to summarize or size-up the situation. It's equally true to say anhydrous ammonia prices are up "17% from last spring" and "37% from the fall." However, these statements are difficult to reconcile and have different degrees of impact on our thinking.

While fertilizer prices are higher, it's important to remember the context. Prices are up from historic lows and, for the most part, remain well below the levels of 2011-2014. The exception, however, is phosphorus fertilizer. In many ways, phosphorus is the biggest chapter of the 2021 fertilizer story.

Finally, the story of 2021 also depends on the products and timing used. For example, producers that priced their fertilizer last fall will likely have some of the lowest expenses of the last ten years. However, a producer pricing their fertilizer today and reliant on urea will have significantly higher expenses.

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