Following the historical high prices of 2021 and 2022, fertilizer prices significantly declined in 2023 as supply chain disruptions eased. This trend largely continued into 2024. As shown in Figure 1, fertilizer prices this year have fluctuated around similar levels as in 2023, more than halving from the peak in March 2022. While prices have stabilized, they remain elevated compared to pre-pandemic levels.
Although the market has overall stabilized, individual nutrient prices exhibit varying trends. As shown in Figure 2, potash prices declined consistently throughout 2024, averaging around 20% lower than 2023 levels. In contrast, phosphorus fertilizer prices remained high in 2024, with monoammonium phosphate (MAP) and diammonium phosphate (DAP) prices exceeding 2023 levels for most months, especially in June and July.
As for nitrogen-based fertilizers, all prices were lower in 2024, with decreases ranging from 7% for anhydrous ammonia to around 12% for urea ammonium nitrate UAN)28 and UAN32. However, urea and anhydrous ammonia prices showed signs of recovery toward the end of the year.
Factors in play in 2024
Like most commodities, fertilizer price fluctuations are driven by supply and demand dynamics. The generally lower prices in 2024 primarily reflect a subdued demand, stabilized input costs and the absence of large global market disruptions.
On the demand side, fertilizer costs account for a significant portion of crop production expenses, and declining commodity prices have dampened fertilizer demand. The USDA projects the season-average farm price for corn at $4.10 per bushel for the 2024 crop, almost 40% lower than in 2022-23. Substantial declines are also anticipated for wheat (37%), soybeans (24%) and barley (11%). With the lower crop prices and tighter profit margins, farmers likely reduced or at least restrained spending on inputs like fertilizers, leading to relatively subdued demand in the fertilizer market.
On the supply side, production costs for fertilizers have significantly decreased. Natural gas, the main input for nitrogen fertilizers, has seen sharp price declines over the past two years. The annual average natural gas prices at Henry Hub dropped from $6.45 per million British thermal units (Btu) in 2022 to $2.54 in 2023. In 2024, monthly average prices were around 15% lower than 2023. While European natural gas prices remain high compared to pre-pandemic levels, they have also declined significantly since 2023.
The global supply chain also saw no major hiccups in 2024. As a significant fertilizer importer, the U.S. depends heavily on global markets, sourcing over 90% of its potash and approximately 10% of its phosphorus and nitrogen fertilizers. The majority of potash imports come from Canada (77%), followed by Russia (11%) and Belarus (6%). Nitrogen-based fertilizers are primarily supplied by Trinidad and Tobago and Canada, while phosphate imports mainly originate from Peru. Despite the ongoing Russia-Ukraine war and the Israel-Palestine conflict, these events did not introduce significant new disruptions to the global fertilizer supply chain in 2024.
The export restriction from China, a major supplier of phosphorus fertilizer, is likely one key reason that phosphorus fertilizer price did not experience similar levels of decline as the other two types of fertilizers. To ensure sufficient domestic supply, in November 2023 China imposed a de facto export ban on phosphorus fertilizer. While it relaxed its export restrictions in March 2024, China’s phosphate exports remained significantly lower than pre-pandemic levels.
2025 outlook: Price stabilization with cautionary factors
The outlook for the fertilizer market in 2025 suggests relative price stability or a slight downward trend. On the demand side, low crop prices are expected to persist. As of early December 2024, the futures market indicates that prices for major crops like corn, soybeans and wheat in 2025 will likely be slightly higher than in 2024 but remain well below the peaks of 2022-23.
Policy developments in 2025, with the Trump administration assuming office, introduce significant uncertainties. The administration’s plan to expand fossil fuel production through increased oil and gas exploration on federal lands and offshore areas could benefit the fertilizer industry by potentially further reducing natural gas prices. However, the foreign policy stance of the administration may exacerbate geopolitical tensions in fertilizer-exporting regions, introducing upward pressure on global fertilizer prices. Trade policies add further complexity. Proposed tariffs on imports from Canada, a major supplier of potash to the U.S., could significantly increase potash prices, impacting fertilizer costs and market stability.
Meanwhile, possible rollbacks of environmental regulations might lower compliance costs for fertilizer producers. In the short term, this may enhance profitability and encourage further domestic fertilizer production. However, it could also lead to increased environmental concerns, potentially, and affect the long-term sustainability of agricultural practices. Reduced federal support for sustainable agriculture may also influence market demand, reshaping the fertilizer industry in the coming years.
Another significant factor that could come into play is transportation disruptions. While nitrogen fertilizers are produced in many states, about 60% of the domestic production capacity is located in Louisiana, Oklahoma and Texas. Low water levels in the Mississippi River, a major transportation route for fertilizers, could create severe transportation bottlenecks. These challenges can be exacerbated by shortages of rail and truck resources, leading to increased delivery costs and delays.
Amid these complexities, growers in the U.S. need to remain flexible in their procurement strategies. A common approach is to stagger purchase decisions across multiple time periods, which helps to average out price fluctuations. Soil testing also plays a crucial role, as it helps farmers optimize nutrient management and refine fertilizer application strategies to reduce costs, while maintaining soil health and crop productivity.
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