Planning For 2022 Input Cost Increases

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Planning For 2022 Input Cost Increase

Steve Doench, Head of Sustainable Agronomy
Steve Doench,
Head of Sustainable Agronomy

Costs of crop inputs (particularly fertilizer, fuel, and pesticides) have increased sharply over the past 6 months and have set up a more challenging path to profitability for the 2022 crop season.

This segment will focus on fertilizer cost increase and ideas for managing costs without overly penalizing yield goals.

Crop input prices have spiked going into fall and will require input budgets to be finely tuned.  Commodity prices are also much higher for next fall vs. prices that was seen last fall for 2021 fall. This will help offset the higher input costs.

Grain Marketing

Non land cost for corn and Soybeans from Farm doc daily
Image data from Farmdocdaily. Click the image to go to the full report.

When selling grain, growers look at CBOT futures. The data for corn and soybeans for 2021 and 2022 are in the table below.

[1] Corn December 21 future
[2] Corn December 22 future
[3] Soybean November 21 future
[4] Soybean November 22 future

The difference between the price of CBOT futures and the local cash price is called “basis.” When the CBOT futures price is above the local cash price, the basis is “negative.” Conversely, when the local cash price is above the CBOT futures price, the basis is positive. The assumption here is that the local cash price is lower than the CBOT futures price by $0.30/bushel.

Data from USDA NASS

Input prices historically have not caused many swings in what is planted in the US. However, the 2022 season could be an anomaly based on forecasted returns and input availability.

Nitrogen Fertilizer

Nitrogen fertilizer prices are the main fluctuating factor of production cost separating corn from soybeans; soybeans do not require nitrogen fertilizer and corn yield is highly dependent on nitrogen fertilizer.  The spread this season, for a 200 pound per acre N application on corn, increases corn costs by ~$80-100 per acre compared to last fall.

Nitrogen fertilizer prices are the main fluctuating production cost factor separating corn from soybeans

Nitrogen fertilizer prices are all up compared to 2020 data. The image below shows the relationship between corn prices, anhydrous ammonia, and natural gas prices.

Corn prices per bushel related to nitrogen and gas prices
Corn prices per bushel related to nitrogen and gas prices. Data from farmdocdaily.

When looking at the actual prices of various N, P, and K fertilizers in the table below, almost all have more than doubled since 2020.

Fertilizer prices based on USDA data
Fertilizer prices based on USDA data:

There are no easy ways around reducing N applications for corn.  In the Midwest, much work has been done around a concept called “Maximum Return to Nitrogen” (MRTN) that optimizes the amount of nitrogen related to the expected yield. It helps to make a more informed decision about the amount of nitrogen to apply, but nitrogen still needs to be used to get a reasonable yield. More information can be found on the MRTN website.

Now let’s consider data from fall 2020 vs. fall 2021. Utilizing CBOT CZ future prices of corn and today’s prices based on nitrogen per lb. for anhydrous ammonia, the firm commodity markets seen today for fall 2022, have corn prices at $5.00 per bushel (vs. $4.00 per bushel in fall 2020). This will help keep N fertilizer amounts in perspective.

To get the same economic return in 2022 vs. this past season, N rates only need to be reduced by about 14%.  There will be many other factors to consider as decisions are made for the 2022 planting season. For now, the use of tools like the MRTN model can help growers make the most informed decisions in these complicated input cost environments.

An example of rates and charts from the MRTN model.
An example of rates and charts from the MRTN model.

Solutions for high nitrogen fertilizer costs

Possible solutions for managing high N costs:

    • Apply more N as spring split applications and/or in-season to reduce the risk of N losses from weather events.
    • If using urea, make sure to use a nitrogen stabilizer.
    • Utilize soil nitrate tests to have more information on nitrate availability.
    • Increase efficient crop residue breakdown after harvest to make the C:N ratio more balanced for the 2022 season.

Phosphorus (P) and Potassium (K) Fertilizers

P and K fertility are often looked at as something that can be skimped on to reduce input costs in any year.  “Mining” the soil bank of P and K and reducing overall levels of fertility can be done in fields with adequate to high soil test levels. Still, it is not a wise long-term solution to deplete soil fertility levels and later be in a position where yields suffer from lack of fertility. Then, a multi-year build-up program is required to re-establish the productivity of the field.

Solutions for high P and K fertilizer costs

Possible solutions managing for higher P and K costs:

    • Complete a post-harvest soil test to understand current nutrient and pH levels in a field to have the correct information to base decisions on.
    • Set realistic yield goals for 2022 and see if maintenance fertilizer applications will be enough to not restrict crop yields in 2022.
    • Make sure soil drainage and pH are in good order to maximize the use of crop inputs for the 2022 season. While liming costs are higher than last year, optimized soil pH levels for nutrient uptake will help offset any reduced fertilizer applications for 2022.

What can you do to mitigate increased input cost?

Meet with a trusted advisor and consider using products that help make soil nutrients more available to crops in the 2022 season.  Many bio-stimulants and other products have data to support their effectiveness in assisting plants to be more efficient with nutrient uptake.

What is your Witch's brew for 2022?

If glyphosate and/or glufosinate is unavailable, what post-emerge options would be used along with the approved herbicide for your soybean herbicide trait(s) being grown in 2022? 

Consider using adjuvants to ensure that the applied liquid nutrient reaches its intended target. They can improve deposition, spreading, uptake on foliage, and improve soil wetting. There are specific adjuvants that can improve the efficiency of soil- and foliar-applied nutrients, helping to make the most of each fertilizer application.

Planning for the 2022 crop season is not an easy task. Evaluating crop nutrient needs vs. what is already available in the soil vs. what can be applied, will help determine the best economic return and allow for crop budgets to be spent wisely.

End of harvest

2021 US Crop Season Review

The 2021 US corn and soybean crop season saw a return to farming profitability as a bull market for agricultural commodities was established ahead of reactive land and input cost price increases by the end of the harvest. Farming is a cyclical business with lots of unknowns; the cycles seem to change faster and faster as the global economy can create surplus and shortage situations on a very short time scale.

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