By Chuck Abbott
October 18, 2023

Lower fertilizer costs will ease breakeven challenge for farmers, says Purdue

Commodity prices are forecast to fall in 2024 but so will crop production expenses, said agricultural economist Michael Langemeier of Purdue University. “Moderation in input prices, particularly fertilizer prices, is likely to result in lower breakeven prices in 2024.”

Farm production expenses were forecast by the USDA at a record $458 billion this year, up nearly 7% from 2022, when expenses surged by 15%. Fertilizer and fuel costs soared in 2022 and were a sore point in farm country. Fuel prices would decline and fertilizer prices would hold steady this year, according to an August USDA estimate.

To offset high production costs, farm groups have called for higher reference prices, which would make crop subsidy payments more likely in the new farm bill. A 10% increase in reference prices could boost crop subsidies by $20 billion, according to one analyst. Lawmakers have not agreed on how to offset the expense and stay within spending limits. The farm bill is on the legislative back burner while the House selects a new speaker and Congress works on government funding bills.

“Breakeven prices for corn and soybeans are expected to decline from 5 to 10% in 2024 after increasing sharply in 2022 and 2023,” wrote Langemeier, after comparing changes in farm input costs with the overall U.S. inflation rate. Fertilizer, diesel fuel, and ag chemical prices have fallen steeply in the past year — nearly 50% for anhydrous ammonia, a nitrogen fertilizer.

“Despite the large decreases in the past 12 months, fertilizer prices are still well above what they were in 2020,” said Langemeier. “The August 2023 price for anhydrous ammonia is still 20% higher than it was in 2020. The input price [increases] for supplies and repairs, machinery and wages were approximately 2.5%.”

Over the long term, farm input prices tend to track the U.S. inflation rate, more so for machinery and labor than for feed, seed, fertilizer, and fuels, said Langemeier.

Although costs are expected to be lower in 2024, corn and soybean growers would still face breakeven prices of more than $5 a bushel for corn and $12 a bushel for soybeans in Illinois, said a team of Midwestern agricultural economists in August. Growers were more likely to make money with soybeans than corn, they said in estimating expenses and revenue from 2024 crops.

“Reductions in fertilizer prices are the main factor in the non-land cost decline,” said the economists, writing at the farmdoc daily blog. “No other costs are projected to decline.”