TOPEKA, Kan. (RFD-TV) — Fertilizer costs remain a major concern for producers as they plan for the next growing season, but a disconnect between natural gas production and prices compared with nitrogen fertilizer costs continues to raise questions across agriculture.
Roger McEowen with the Washburn School of Law joined us on Monday’s Market Day Report to discuss “The Nitrogen Paradox” and why lower natural gas prices do not always result in lower fertilizer prices.
In his interview with RFD-TV, McEowen said the key to understanding the issue is that fertilizer prices are not based solely on production costs. While natural gas helps determine the cost floor for manufacturers, he said global supply and demand, crop prices, transportation costs, and competition all influence the final price farmers pay.
He said the shale revolution in the early 2000s significantly lowered U.S. natural gas prices and gave American fertilizer manufacturers some of the lowest production costs in the world. However, he said those savings did not automatically translate into lower retail fertilizer prices because fertilizer is traded in a global commodity market.
McEowen said producers should not build fertilizer budgets around natural gas prices. Instead, he encouraged farmers to focus on crop margins, overall profitability, and coordinating fertilizer purchases with grain marketing decisions.
He also discussed factors affecting nitrogen fertilizer prices beyond domestic production, including geopolitical events, export restrictions, energy disruptions, industry concentration, and barriers to building new fertilizer facilities. McEowen said new nitrogen fertilizer plants require billions of dollars and years of development, limiting how quickly new supply can enter the market.
McEowen said seasonal demand and transportation challenges also play a role in fertilizer markets. He encouraged producers to focus on managing the risks they can control, including improving nitrogen use efficiency, locking in fertilizer prices when opportunities are available, and incorporating fertilizer decisions into broader cash flow and tax planning strategies.
READ MORE: The Nitrogen Paradox—Why Cheap Natural Gas Fails to Yield Cheap Fertilizer
