A new study suggests that natural gas prices are not driving fertiliser costs.
Researchers at Texas A&M University have released the findings of a new analysis, entitled Economic Impact of Nitrogen Prices on U.S. Corn Producers.
Farm groups joined the National Corn Growers’ Association press conference on January 12th, 2022, to discuss concerns over pending tariffs on nitrogen fertiliser.
Natural gas prices
According to the National Corn Growers Association, pending tariffs on nitrogen fertilisers will create shortages and cause prices to increase even more for farmers.
“As part of this study, we conducted a historical analysis going back to 1980 and found that fertiliser costs tend to go up when corn revenues increase,” lead researcher Joe Outlaw, PhD, noted.
“Notably, these prices tend to go up exponentially even after accounting for natural gas prices and higher demand.”
He said that “any idea that higher natural gas prices are driving fertiliser costs is not valid”.
“The suggestion that recent increases in the price of natural gas are the primary reason for recent increases in the prices of nitrogen products is highly suspect,” the report states.
The study reports that the price of one type of nitrogen fertilizer, called anhydrous ammonia, increased by $688 per ton – $86,000 for a 1,000-acre farm – from the end of 2020 through the end of October 2021.
The study has farmers raising concerns about a petition by CF Industries, one of the country’s major nitrogen producers, with the U.S. International Trade Commission to impose tariffs on nitrogen fertilisers imported from Trinidad & Tobago and Russia.
The U.S. Department of Commerce has since released a preliminary finding recommending tariffs, despite strong outcry from farm groups.
North Dakota farmer and North Dakota Corn Growers Association President Rob Hanson said:
“Inflation has quickly become one of the biggest concerns for the upcoming year on the farm. The skyrocketing fertiliser prices we are seeing is nothing less than shocking.”
“All at the same time, these companies see record earnings. This undoubtedly will result in a ripple effect throughout the farm economy. Harmful to the grower and to the consumer.”
In addition, the research quantified natural gas, a key component in nitrogen fertiliser, only accounts for 15% of the variable costs.
State corn organisations in the following areas commissioned the study:
- New York;
- North Carolina;
- North Dakota;
- South Carolina;
- South Dakota;
The purpose was to evaluate the impact of higher nitrogen prices on farms and, to the extent possible, to determine the factors that are the primary causes of higher prices.