USDA demonstrates impact of fertilizer prices on corn production costs

The United States Department of Agriculture’s Economic Research Service (USDA ERS) has recently published a report detailing the significant role of fertilizer costs in corn production. Fertilizer, a crucial input for corn growers, typically represents the largest variable expense in the crop’s cultivation, particularly in the critical planting months of April and May.

Historically, the cost of fertilizer per acre for corn has seen fluctuations over the years. According to the USDA ERS’s Commodity Costs and Returns data product, which is updated annually every May, the average cost from 2006 to 2021 was approximately $125 per acre, without adjusting for inflation. This figure experienced a sharp increase in 2022, reaching an average of $225.78 per acre, before declining to an estimated $186.73 in 2023. This trend indicates a significant 89-percent increase in costs from 2021 to 2022, followed by a 17-percent decrease from 2022 to 2023.

The report also provides insight into other production costs faced by corn farmers, including operating expenses like seed, fuel, and chemicals, as well as overhead costs encompassing labor, machinery capital recovery, and the opportunity cost of land. This latter category accounts for the potential rent or income forgone by farmers choosing to cultivate their land rather than lease it out.

Notably, fertilizer expenses constituted about 22 percent of the total per-acre corn production costs from 2006 to 2016. This proportion dropped to an average of 17 percent from 2017 to 2021, hitting historical lows. However, the spike in prices in 2022 elevated fertilizer costs to approximately 24 percent of total costs, though this was still lower than the 26 percent peak observed in 2008.

Despite a reduction in fertilizer prices from 2022 to 2023, overall corn production costs have remained high relative to levels observed in 2021 and prior years. Preliminary data from the USDA’s Agricultural Marketing Service indicates a decrease in the prices of key fertilizers such as anhydrous ammonia, urea, and liquid nitrogen (32 percent) from 2023 to 2024, with slight increases noted in February’s second reporting period.

The full cost of production data for 2023, which will further elucidate these trends, is scheduled for release on May 1, 2024. This report is awaited with interest by stakeholders across the agriculture sector, as it will offer valuable insights into the economic pressures facing corn producers and the broader implications for the agriculture industry.