Gro’s early season outlook for US fertilizer application rates points to a 5% year-over-year increase in nitrogen application on corn areas, due to improved affordability and better soil moisture conditions. And, if the current favorable conditions persist through May, application rates could further rebound and mark a 7% rise.
Even though fertilizer prices remain historically high and this season’s application rates will likely remain below the recent five-year average, the expected increase in application rates should provide a boost to US corn production. Last season US farmers sowed the smallest corn crop since 2015, partly because of high input costs.
View this Gro display of US Nitrogen Fertilizer Fundamentals showing fertilizer prices, application rates, and the corn supply & demand balance sheet.
Corn farmers must replace nitrogen levels in soils each season, but they can skip or curtail applications of phosphate and potassium, depending on economic conditions and affordability, without significantly sacrificing yield. Because of affordability concerns, many US farmers limited in-season applications and relied on existing soil reserves of phosphorus and potassium last year.
As US farmers deferred fertilizer purchases, retail and wholesale spot physical fertilizer prices began to decline in late 2022, setting in motion improvements in fertilizer affordability throughout this quarter, as we wrote about here.
Since this time last year, US retail urea prices have fallen 29%, and affordability — measured as the ratio of cash corn to the value of nitrogen in urea prices — has improved by 19%. Currently, fertilizer affordability in the US is at its best level since September 2021 because fertilizer and crop values diverged substantially since the floor reached last summer, when the 2022/23 fertilizer fiscal year began.
A sharp expansion in the number of US acres planted to corn also points to a rebound in fertilizer consumption across macronutrients this spring, but other dynamics are in play.
For example, retailers might be hesitant to write-down higher priced inventory purchased earlier in the 2022/23 fertilizer fiscal year, as wholesale prices sink prior to spring plantings. Slower fertilizer price depreciation at retail locations compared to wholesale values could mitigate a rebound in application rates, in which affordability is a leading driver.
It is still very early, but risks of planting delays also exist in the US’ central to eastern Plains. There, forecasts into mid-April suggest normal-to-wetter than normal conditions. Seasonal models also forecast normal to above-normal precipitation from March through May across US corn and soybean growing areas. Additionally, the US Climate Prediction Center forecasts a near 50% chance of a transition to El Niño conditions between June through August. This too could usher in a normal-to-wetter than normal weather pattern for much of the US’ corn and soybean growing regions, as we wrote about here.
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.
Gro’s Fertilizer Impact Monitor was built with support of the Bill & Melinda Gates Foundation and in partnership with the International Fertilizer Association and CRU Group.