Gro’s fertilizer affordability index has bounced off its record low readings from mid-2022
Retail fertilizer prices have become more affordable in the US, a Gro analysis shows, indicating that US farmers are likely to increase applications of key crop nutrients during the 2023 growing season compared to last year.
To be sure, fertilizer prices are still well above historical norms, and nutrient affordability remains close to historically low levels. But Gro’s fertilizer affordability index, which evaluates the relationship between input costs and crop prices, has bounced off the record low readings for affordability hit in mid-2022. (See the graph below.)
In addition, fertilizer affordability at the retail level is primed to improve further on declining wholesale and import values, and Gro expects that consumption of all key macronutrients in 2023 will increase from last season as a result.
In the US, the fertilizer marketing year begins in July, and farmers typically purchase nutrients for the next planting cycle in the period running from July through the following March. Major swings in fertilizer affordability can influence how much and which kinds of nutrients farmers use. It also affects which crops farmers plant, particularly in key corn and soybean growing regions.
US fertilizer affordability for the month of December on average was 16% higher than in July, according to the Gro index. By the end of 2022, affordability jumped by 29% from the lows reached in late July, when surging energy costs forced the shutdown of as much as 70% of European nitrogen fertilizer production capacity.
Still, a historical comparison shows that retail fertilizer affordability in the July-December 2022 period was 15% below the same period in 2021. Compared with each of the five previous years during the same six-month period, from 2016-2020, average fertilizer affordability in the second half of 2022 was lower by between 25% and 39%.
Gro users can calculate US fertilizer affordability by accessing data on the Gro platform using Gro’s Excel add-in. Contact our team here to learn more.
Low fertilizer affordability especially impacts corn, which is an input-heavy crop. For corn farmers, fertilizer and other input costs are projected to account for 49% of total operating costs for corn farmers in 2023, according to Gro’s US Farmer Profitability & Crop Budgets app. That’s on a par with 2022, but sharply above the average since 2015 of about 40%.
During the 2022 growing season, when fertilizer affordability plunged to a multi-year low, US farmers reduced corn planted acreage by 5% from the previous year, despite a soy-to-corn price ratio that seemed to favor planting corn over soybeans, as seen in this Gro display. Amid lower fertilizer use and subpar weather conditions, average corn yields fell year over year by nearly 4%, according to Gro’s US Corn Yield Forecast Model.
Reduced fertilizer usage in 2022 — due to low affordability and supply disruptions — impacted food production around the world. In the US, an estimated 50.4 trillion calories in staple crop production was lost due to decreased applications of nitrogen fertilizer, according to Gro’s Global Fertilizer Impact Monitor, which calculates the impact on crop output worldwide based on projected cutbacks in nitrogen fertilizer consumption.
Globally, reduced nitrogen usage in 2022 decreased staple crop production by as much as 216 trillion calories, which is nearly twice the annual output of staple grain commodities in Mexico.
The Fertilizer Impact Monitor, which was built with support of the Bill & Melinda Gates Foundation and in partnership with the International Fertilizer Association and CRU Group, is free for anyone to use. Gro recently updated the Monitor to allow users to view changes in fertilizer usage forecasts, along with their impacts on crop production, using a toggle function.