COMMENTARY- Rising cost of fertilizer is stealing so-called record farm income

It?s an everyday sight across Kansas farm country these days. Travel down about any rural road and you?ll come up on a white anhydrous ammonia nurse tank puttering about 30 mph.

The race is on throughout the state as farmers rush to apply anhydrous ammonia to their land that will be planted to corn next spring. Not only are the ag producers racing to beat the weather, but they?re trying to finish their fall application of fertilizer?used to help provide nutrients for next year?s crops?before the price goes up anymore.

Talk to any producer and he?ll tell you the soaring costs of inputs, particularly fertilizer costs, are his main, near-term concern. Currently the cost is about $680 per ton for anhydrous ammonia, according to Nemaha County farmer Jeff Grossen?bacher.

Farmers who purchased their fertilizer earlier in the year may have paid $460 to $480 a ton. Ammonia has risen $200 a ton the last several weeks.

?It?s really going to impact our bottom line going into next year?s corn crop,? Grossen?bacher says.

The northeastern Kansas farmer finished knifing anhydrous into last year?s bean ground last week.

Just a few short years ago, anhydrous ammonia sold for $160 to $200 a ton. It fluxuated in this range for years.

But fertilizer isn?t the only input that has gone through the proverbial roof. Fuel, seed and chemical prices are right behind. He figures it will cost him nearly $250 an acre to plant corn this spring.

Grossenbacher?s fuel cost for October totaled $6,000. Since he?s been farming 100 percent no-till the last five years, he?s steadily decreased his diesel fuel usage. In spite of this decrease, the cost of fuel on his farm has steadily risen.

?We?re using between 2,000 and 3,000 gallons less in diesel fuel today, but we?re paying more for it,? the Nemaha County farmer says. ?Today?s operating costs are eating up our higher prices we receive for our beans and corn.?

Like so many farmers and ranchers in Kansas and across the United States, Grossen?bacher?s gross farm income may be up but his net income is down. He says few consumers realize what it costs to raise food.

?Pick up a newspaper or turn on the television and all you hear about is farmers making record profits,? Grossenbacher says.

?What the media report is gross farm income, not net. Farmers and ranchers are not getting a windfall out here in farm country. All our inputs are up 20 to 25 percent.?

Historically, grain prices don?t remain high for long. Once the price goes up, producers do what they do best and produce bumper crops and prices retreat. Unfortunately, input costs rarely follow these commodity prices down.

So what is the forecast for future fertilizer costs?

Fertilizer-related expenses will continue increasing for the foreseeable future. Supplies of nitrogen, phosphates and potash will remain tight as worldwide demand for these fertilizers remains strong, according to the Fertilizer Institute.

Although there is a lessening demand for nitrogen because of fewer acres of corn to be planted in ?08 (88 million acres compared to 93 million acres this year), don?t look for a drop in anhydrous prices. It ain?t going to happen.

The United States imported about 57 percent of its nitrogen last year, compared to 31 percent in the 1999/2000 production year. The main reason given for the import increase is rooted in the price of natural gas, nitrogen fertilizer?s key ingredient.

Other fertilizers U.S. grain growers use, including phosphates and potash, are increasingly used by world competitors. With increasing reliance on phosphates and potash in Brazil, India and China, coupled with strong demand in the United States, prices are likely to stay at or above current levels.

Farmers are looking at a tight fertilizer picture for the next two or three years, at least, says Bob Young, American Farm Bureau Federation economist.

Few breaks are expected before 2009 or even the 2010 growing season.

Digesting this kind of news, Kansas farmers will be busy planning for next spring. They?ll be taking a hard look at their balance sheets to determine how much fertilizer to purchase ahead of planting time. They?ll also be figuring ways to reduce fertilizer use to the bare minimum and still grow healthy crops.

John Schlageck is a leading commentator on agriculture and rural Kansas. Born and raised on a diversified farm in northwestern Kansas, his writing reflects a lifetime of experience, knowledge and passion.

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