Historical fertilizer prices have been relatively stable or even fell for five years till 2020.
“Fertilizer prices approximately doubled between the summer of 2020 and the end of 2021,” reports Aaron Smith, the Deloach Professor of Agricultural Economics in the Department of Agricultural and Resource Economics at UC Davis.
The last time fertilizer prices rose this steeply was in 2008, by 32 to 100%.
Why are fertilizer prices going up?
Fertilizers are a global commodity, and prices reflect world trends. Low demand for fertilizers was predicted at the start of the pandemic in 2020. But an increase in the prices of grains boosted the international demand for fertilizers. Pandemic-related transport problems caused supply disruptions between countries, and domestic industries couldn’t produce enough to cover supply gaps.
Also, fertilizer production costs rose as they are energy-intensive. Rising energy prices in 2021 contributed further to fertilizer price hikes by making the transport of materials costly.
Consequences of High Fertilizer Prices
Fertilizer prices make up around 15% of the farm costs. The increasing fertilizer cost per acre will raise the cost of production for farmers.
Usually, the “breakeven ratio” for growing cereals is six. That is, six kilos of cereals pay for a kilo of nitrogen. With high current fertilizer prices per ton, that ratio is now ten. In these circumstances, farmers are wondering how to keep farming profitable. If they use less fertilizer, that will reduce the yield and quality of food.
A rise in food prices for consumers is inevitable in these circumstances. The FAO Food Price Index reached an all-time high in March 2022. Wheat prices are up by 19.7%, and barley, sorghum, and corn prices by 20.4%.
The Solution- Precision Ag
But there is a solution – Precision agriculture.
Precision agriculture can help growers get more yield with less input, by providing field-specific insights and enabling variable-rate application of nutrients. Instead of using broad regional recommendations for growing a crop variety, the farmer makes decisions informed by actual crop status in their fields.
Crop growth and performance vary due to small-scale differences in soil fertility, nitrogen credits from last year’s fertilizer application and cover crops.
These in-field variations are captured by remotely sensed images taken by drones and satellites. Software providers, such as Agremo, use artificial intelligence, machine learning, and computer vision to analyze the images and send reports to clients, who could be farmers, cooperatives, or agricultural, seed, and fertilizer companies.
The reports have an analyzed farm map showing the crop performance levels of the different farm areas. In variable-rate application of nutrients, growers add more fertilizers where crop performance is low, and less or no fertilizers where the crop is doing well. Adding the same amount of fertilizers to the fields raises the risk of overuse in good performing areas, reducing soil fertility and encouraging more weeds, resulting in less yield and food quality. Thus, growers will improve their harvest by optimizing growing conditions for the crops throughout the fields.
Growers can monitor crop performance throughout the season based on crop stand, biomass accumulation, plant vigor and stress, and field conditions to take proactive measures to reduce fertilizer use.
Will fertilizer prices go down in 2022?
Unfortunately no! Fertilizer prices have risen by another 30% in the first quarter of 2022 due to supply disruptions driven by war, sanctions, and export bans. However, there is considerable industry experience in precision agriculture to help growers and agricultural companies reduce their fertilizer use and tide over the current price hike.