Fertilizer Shock Hitting at Tough Time

OMAHA (DTN) -- As fertilizer and fuel prices surge following the war with Iran, corn farmers warn a significant share of producers are heading into planting season without input prices locked in, exposing them to sharply higher costs.

As global fuel and fertilizer prices face a shock to the system, farmers have seen prices for nitrogen and phosphate fertilizers rise sharply as a result. While a large number of commodity farmers would typically have fertilizer pre-purchased, that likely isn't the case this year. Corn and other commodity farmers are in their fourth year of negative margins, eroding equity. Producers may have been waiting for their Farmer Bridge Assistance (FBA) payments as well, said Matt Frostic, a Michigan farmer and first vice president for the National Corn Growers Association (NCGA).

Just talking about nitrogen prices, Frostic said, "There will be a significant percentage of farmers who are going to face higher prices on this critical input this spring."

NCGA held a livestreamed press conference on Wednesday with farmers and economists to take stock of the supply chain shocks that have emerged since early March.

Even before the war began, Frostic said fertilizer dealers were only giving farmers short windows to prepay for products. A lot of producers were unwilling to make those spot purchases, he said.

"Many farmers didn't necessarily lock in those prices or didn't have the financial ability to do so," said Frostic, who also chairs NCGA's input task force. He added, "Many of the producers have used up their equity, they've used up their borrowing power, and they simply have no cash to put a respectable crop in this year ... It's a really red flag at this point."

NITROGEN PRICE MOVES

As DTN's Retail Fertilizer Trends reported this week, UAN28 has risen 13% in the past month, urea is 12% higher than in February and anhydrous ammonia is 7% more expensive than last month. At $924 a ton, anhydrous also is 23% higher than it was the same week last year.

"So, there are going to be a lot of producers out there who have not locked in that price," Frostic said. "We're going to be victim to the high cost of fertilizer based on just that. So, nitrogen could be as high as another $90 an acre."

Frostic and Brandon Hunt, a Kentucky farmer and NCGA board member, also told reporters cutting nitrogen applications has a direct correlation to yields. Farmers will face yield losses if they don't have the ability to purchase the fertilizer they need. "Nitrogen is like that energy drink to the plant," Hunt said.

Fertilizer dealers are raising prices because they will need to index their inventory they have in stock to the higher costs that they will pay to replace those products, Frostic said. He pointed to higher urea prices at port waiting for delivery.

Corn farmers were already facing a fourth straight year of financial losses before the war began on Feb. 28. Crop prices have remained stubbornly low while input prices remain high. Using USDA price and cost projections, farmers were already looking at net losses of $150 an acre before seeing prices spike.

"We're really trying to balance right now economics and yield production at the farmgate," Hunt said. "That causes some different discussions than we've had in years past, probably."

FBA DASHBOARD

USDA began paying farmers under the ad-hoc FBA program at the end of February just as the war began. USDA's dashboard for the program shows $7.7 billion of the $11 billion for commodity farmers has already been disbursed, including $3.9 billion to corn farmers.

Frostic said FBA payments help but they don't address the current circumstances facing farmers.

"I think for perspective, the bridge payment I received would cover about 10% of my inputs -- maybe," Frostic said.

ACREAGE SHIFT?

USDA's initial forecast for 2026-27 crops projected in mid-February that corn acres would fall 4.8 million acres to 94 million planted acres while soybean acres would increase to 85 million acres, up 3.8 million acres from last year.

Some analysts have speculated that corn acreage would continue to fall as a result of the higher fertilizer prices.

All options are on the table, Hunt said, but he added acreage shifts would depend on having readily available supplies of seed to switch crops.

"That takes a pretty big pivot right here on the cusp of planting season," Hunt said. "Trying to reallocate your corn seed for soybean seed, that's not an easy lift to accomplish from a supply side of what we have access to."

USDA will have more details on farmer views on the corn-soybean acreage dynamics with the Prospective Plantings report, which will be released March 31.

As last year showed, however, USDA might not know until later in the year the full impact of farm decisions being made now.

"I don't think we have to be alarmed about any shortage of corn," said Lesly McNitt, NCGA's vice president of public policy.

PUSH FOR E15 WAIVER, LEGISLATION

One area that could help boost profitability for corn farmers would be higher demand through 15% ethanol blends. NCGA economists and policy team said they are calling on EPA to issue another summer waiver for E15 to provide some stability in the supply chain for liquid fuels.

The White House has tentatively set a meeting for March 27 with farm groups and biofuel producers where the president is expected to announce the 2026 renewable volume obligations (RVOs) under the Renewable Fuels Standard. It's also possible EPA could announce an E15 waiver at that time.

Corn growers and biofuel groups have been pressing Congress to reach a compromise on legislation that would ensure year-round E15 access rather than relying on summer driving-season waivers. A bill being negotiated with a group of petroleum refiners over small-refinery exemptions (SREs) has yet to be finalized.

"Any legislation at this point is going to include SRE reform as well as E15 access" said Matt Ziegler, NCGA's director of public policy for renewable fuels.

McNitt added E15 has a lot of support in Congress but the tight margins in both chambers make it difficult to legislate because any single member can carry a lot of influence with their vote.

"There still seems to be a perception gap, or maybe a gap in understanding about why this is so important to farmers and why it's so beneficial to have year-round E15 for consumers," McNitt said.

JONES ACT WAIVER

President Trump on Wednesday also issued a 60-day waiver of the Jones Act -- the Merchant Marine Act of 1920 -- which requires goods shipped between U.S. ports to be carried on U.S.-built and owned vessels. White House Press Secretary Karoline Leavitt posted on X that the move will help mitigate disruptions in oil prices. She also stated the action would allow fertilizer to move more freely between ports.

The Fertilizer Institute (TFI) said the suspension of the Jones Act would more easily move fertilizer around the country and reduce shipping costs. Because of the Jones Act, TFI said shipping internationally can cost less than moving U.S. product from port to port.

"This action is especially important given the structural challenges in fertilizer logistics. The U.S. faces a classic mismatch between demand geography, where fertilizer is needed by farmers, and production geography, where fertilizer is produced," said Corey Rosenbusch, president and CEO of TFI. "Expanding transportation flexibility can help alleviate that strain."

Still, the Cato Institute last week released an analysis showing the Jones Act essentially doesn't work for commodities such as fertilizer. "Among oceangoing dry bulk carriers, the workhorses of fertilizer transport, precisely zero exist in the Jones Act fleet," Cato detailed.

See, "DTN Retail Fertilizer Trends, All 8 Retail Fertilizer Prices Higher, With 4 Up Significantly," https://www.dtnpf.com/…

Also see, "Fertilizer Companies Face Lawsuit as War Disruptions Put Spotlight on Industry," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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