Surging fertilizer costs hit farmers, small businesses, homeowners

A year ago, Glenn Harsh paid around $250 for a ton of nitrogen fertilizer. Today he pays more than $600.

The Delaware County farmer needs hundreds of tons of fertilizer to grow corn, soybeans, and wheat on his 2,400-acre farm near Radnor, which means the price spike increased his overhead costs by thousands of dollars.

“They’ve gone up every year for the last five years or so,” Harsh said of fertilizer prices. “But this year has just been dramatic.”

Supply chain problems are behind some of the cost increases of the last two years. But much of the world’s fertilizer comes from Europe, and Russia’s invasion of Ukraine a month ago forced costs even higher.

Fertilizer costs hit landscape companies, golf courses, but farmers hurt the most

Most fertilizer prices have more than doubled from a year ago, according to the United States Department of Agriculture. The sticker price for anhydrous ammonia is up 235% compared to a year ago; the nitrogen fertilizer urea rose 149%; and liquid nitrogen is up 192%.

“It certainly gets you to pay attention a little bit more to what you’re doing,” said Randy Kehres, director of golf course maintenance for the New Albany Country Club.

The club needs hundreds of pounds of fertilizer every year to keep its 275-acre, 27-hole golf course green and healthy. When Kehres bought fertilizer in the fall, the price had risen $5 a bag from the previous spring. He found himself taking extra soil samples to make sure he didn’t use too much fertilizer.

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The list of organizations that need fertilizer is long. Golf courses, landscaping companies, and public parks must fertilize lawns and fields, in addition to homeowners.

But farmers are particularly vulnerable to cost swings. Fertilizer makes up more than 30% of their expenses, according to the USDA, and they don’t have an easy way to offset price hikes. Commodity prices are set by market forces and boards like the Chicago Mercantile Exchange, leaving growers without the option to raise the price of their goods to compensate for overhead costs.

How bad are the fertilizer price hikes?

The size of the price increase depends on the type of fertilizer. In general, farmers have seen a bigger increase than small businesses, but local companies say cost spikes still take a chunk out of their budgets.

“There was probably an 8 to 10% increase right before COVID (cases) started climbing last year,” said Shane Krahl, the maintenance supervisor for Buck and Sons Landscaping in Hilliard “This year, we’re looking at a 35% average increase across the board for anything fertilizer related.”

Lawn care and landscaping companies used less fertilizer and applied it more efficiently in recent years as customers raised environmental concerns, Krahl said. But those changes can’t completely cushion the blow.

The pandemic's disruption in the supply chain made it difficult to acquire fertilizer at reasonable prices long before Russia invaded Ukraine.

“Last year, I couldn’t even get the products we normally use,” Kehres said. “I had to use a little of this and a little of that to make do.”

To make matters worse, fertilizer costs are rising with salaries and the price of other commodities small businesses need.

"We're hit with this double whammy," said Scott Cooper, who co-owns Lawn Doctor of Greater Columbus on the Northwest Side. Cooper pays workers at least $20 per hour, which is around a third more than he paid them prior to COVID, he said.

Surging gas prices add to travel costs, said Bob Klatt, who owns Bob's Lawn Care in Clintonville.

"The prices of grass seed increased by 10 to 20%, and we use a lot of grass seed," he added.

It’s not clear where fertilizer prices will ultimately land, and some agencies don’t yet know how much extra money they need to budget for it.

The Columbus Department of Parks and Recreation is currently putting out fertilizer bids and won’t know the price tag until it’s further along in the process, a spokesperson said.

Consumers will also have to pay

Small business may need to pass costs to customers.

Cooper played a delicate balancing act, raising prices to compensate for higher costs, without raising them enough to lose customers.

"We probably didn't raise them quite enough to cover the extra costs," he said. Time will tell if Lawn Doctor is still bringing in enough revenue to cover expenses, but Cooper said he hasn't yet seen an exodus of clients.

Other businesses owners said they weren't as fortunate.

“It prices out some people,” Krahl said of his cost increases. “We've lost customers this year.”

Farmers, on the other hand, are stuck with prices set by others.

“Commodity prices depend on global supply and demand,” said Barry Ward, a lecturer at Ohio State University’s College of Food, Agriculture, and Environmental Sciences who specializes in farm management. “Extra costs can't be just added as they wish.”

Farmers like Harsh became hyper-diligent about fertilizer use as the price rose. He uses a strategy known as the “four R” method, applying the right kind of fertilizer at the right rate, at the right time and in the right place.

“To mitigate some of the costs we are doing a more accurate or even more aggressive job of spoon-feeding our crop,” he said. “That stuff does allow us to save 5 to 10%. But when you're talking about the nitrogen going up (192%) in price, that 5 to 10% doesn't make that much of the difference.”

Commodity costs, which rose in tandem with fertilizer costs, has helped farmers to some extent. Corn, for example, climbed from $3.08 per bushel in August of 2020 to $7.42 per bushel in March.

“We’ve seen crop prices at very high levels," Ward said. "There is the possibility, even with these higher costs, of some profitability this upcoming year."

But farmers aren’t paid until after the harvest, leaving them without any way to offset upfront purchases of fertilizer other than taking out loans.

And a March 17 report from the American Farm Bureau found that production cost increases are outpacing commodity price increases.

“We have costs, fuel and parts, and that's not going away,” said Brad Wolford, who grows corn, soybeans, and wheat on a 1,200-acre farm near Circleville. “We can't just go through the whole growing season without any money in the bank account.”

Fertilizer needs aren’t the same for every crop, and Wolford said price spikes might change farmers’ growing habits.

“Corn and wheat require more fertilizer, especially nitrogen,” he said, and farmers who grow those commodities are considering switching to less fertilizer intensive crops like soybeans.

pcooley@dispatch.com

@PatrickACooley