WASHINGTON (Pakistan Point News / Sputnik - 14th April, 2022) US farmers who fail to take steps to mitigate the dramatic increase in fertilizer costs, a trend that began long before the Ukraine conflict, face significant risk if crop prices drop before the fall harvest, Kansas Farmers Union President Donn Teske told Sputnik.
Just as American farmers were already dealing with skyrocketing input costs, Moscow last month suspended Russian fertilizer exports, which accounted for over 12 percent of the $10.3 billion the US imported in 2021, according to UN data compiled by tradingeconomics.com.
Farmers can offset the steep costs of inputs like fertilizer if they can sell their products, agricultural commodities such as grains, at higher prices. And prices for grains commodities like corn and wheat, among other crops, have hit record highs in recent weeks. Moreover, on Tuesday, the Biden administration unveiled a new energy plan that includes funding to boost the use of ethanol, which is expected to benefit the agricultural sector, especially corn farmers.
However, the commodities market is quite volatile, fluctuating daily, hence many farmers look to "lock in" crop prices in contracts with customers to reduce their exposure.
"If the (commodity) prices maintain, they're going to be in better shape than they've been in years, even with the high input costs, but if for some reason the grain prices, commodity prices, drop before harvest and they're not locked in, then they (farmers) really are at serious risk," Teske said.
Some fertilizer and nutrient prices increased as much as 300 percent last year, according to the American Farm Bureau Federation (AFBF). Compared to September 2020 prices, Ammonia rose by 210 percent, urea by more than 155%, liquid nitrogen by nearly 160 percent, while three other key products at least doubled, AFBF economists said in a report in December.
Teske does not see a connection between the conflict in Ukraine and these rising prices.
"The fertilizer price rose so dramatically last fall - way before all of this happened (in Ukraine)," Teske said. "I can't say that I can see that has any connection to the war in Ukraine."
The AFBF attributed the phenomenon to several factors, including rising energy costs, supply chain disruptions, increased demand for fertilizer, along with high prices for raw nutrients like nitrogen, phosphorus, and potassium.
Teske said he has no clear idea about what may be causing the increase in prices, but speculates that fertilizer companies may be taking advantage of the opportunity.
"Frankly I think it's just because they could," Teske said when asked what could be causing the increase in prices. "There was rise in grain prices and it just seemed like the input cost all rose - food, fertilizer, and everything. I think it had a lot to do with the economy - being able to take advantage of the situation."
