(The Center Square) – Things are getting tougher for the country’s breadbasket, a difficult situation that will likely affect the country’s economy.
In addition to 40-year high inflation and new records being set almost daily at the gas pump for the past two weeks, the price of some agricultural fertilizers has skyrocketed as much as 60% above last year.
“An average 2,500-acre corn and soybean farm has seen its fertilizer bill increase by $175,000 in the last year alone, from $250,000 to $425,000,” said economist Loren Koeman. Chief/Manager of Industry, Conservation, and Regulatory Relations for the Michigan Farm Bureau. Center Square.
This is very bad news for farmers, but also for grocery store customers who buy basic foods like meat, dairy and bread.
The Michigan Legislature has sent a message to lawmakers in Washington to help reduce agricultural fertilizer costs. Rep. Steve Carra, R-Three Rivers, is the author of House Resolution 205. The resolution urges the U.S. Congress, federal agencies and state departments to immediately address the continuing fertilizer price increases and shortages that are severely affecting Michigan farmers.
The Michigan House of Representatives approved the resolution and sent it to the US Congress.
“Farmers play a vital role in Michigan’s history, as well as in today’s culture and economy,” Carra, a member of the House Committee on Agriculture, said in a statement. “There are approximately 10 million acres of farmland in Michigan, and we are home to over 47,000 farms. There are millions of acres of farmland that need to be fertilized.
According to Koeman, the main factors driving up fertilizer prices are:
The war in Ukraine has impacted the supply of fertilizers from Russia and Belarus due to sanctions.
Rising energy prices have a direct impact on nitrogen fertilizers, which are made from natural gas.
Higher shipping costs due to both rising energy costs, labor costs, and limited ship and rail availability. Fertilizers are bulky and often have to be shipped long distances from where they are extracted to where they are used.
Consolidation in the fertilizer industry. For example, just two companies control more than 90% of the US potash market. Fertilizer producers are making record profits. For example, Nutrien’s profits for the last 12 months are almost 10 times greater than the profits for 2020.
Modern farmers have increased the efficiency of fertilizers, optimizing the use of technologies such as GPS to test soils and manage individual crop areas in fields, Koeman explained. It is therefore difficult to further reduce fertilizer use without reducing yields.
In the short term, farmers’ profits are reduced by high fertilizer prices. In the long run, farmers need to make a profit to stay in business, so higher fertilizer costs will have to drive up food prices, Koeman said.
It’s not all bad news for farmers.
“This year, farmers were largely able to offset the higher cost of fertilizers with higher crop prices, due to the supply disruption in Ukraine,” Koeman said. “Farmers are concerned, however, that fertilizer prices will remain high even if crop prices fall back to more normal levels, squeezing profits.”
Michigan Farm Bureau industry relations specialist Theresa Sisung agrees with Koeman.
“With high crop prices, farmers hope to offset some of their additional input expenses with higher selling prices and good yields,” Sisung told The Center Square. “Farmers are sharpening their pencils and being diligent in crop sales, and with the help of Mother Nature, it is still possible to have a positive income this year. There is more concern about future profitability if input prices remain high and we see crop prices start to decline. »