Indicators in Focus examines measures of business and economic activity that will help tell the story of 2022.
After fertilizer prices reached new record highs in late 2021, the agriculture sector is watching the price of that key input with great interest in the new year.
Agriculture has not been immune from pandemic-driven supply chain issues and price spikes. Prices of many fertilizers have more than doubled over the last year, according to DTN, which tracks agricultural data. That makes it more expensive to produce some of Missouri’s most important commodities, like corn and soybeans.
Patrick Westhoff, a University of Missouri professor who specializes in agricultural economic forecasting, said strong international demand for American crops has contributed to the situation. Increased costs of chemicals that go into fertilizers has also fueled the price rise.
“Fertilizer is probably one that is getting a lot of people’s attention,” Westhoff said. “Right now, the price of the most common types of fertilizer that people use here in the Midwest have in some cases doubled in the last several months.
Westhoff cited other factors in the fertilizer price surge, including restrictions on fertilizer exports from some countries and the increased price of natural gas — a key input in producing fertilizer.
Hear more: Part 1 of a look at key 2022 indicators from the Market Dives podcast
That all has caused costs to rise for farmers. A September report from MU’s Food & Agricultural Policy Research institute estimated the cost to produce a bushel of corn has increased 22% from 2020 to 2021, while soybean production costs rose 21% over that period.
Meanwhile, the end of record-high government subsidies is putting added financial pressure on farmers. These payments helped offset pandemic hardships, but with the payments going away, farmers have significantly less support to offset the rising input costs.
“We had a record level of government payments to the farm sector in 2020 — $46 billion, which was not only a record, but a record by tens of billions of dollars over the previous standard,” Westhoff said.
“This year’s payments are much smaller because we took away some of those special one-time ad hoc programs. And those … will probably decline even further in 2022.”