Farming Costs and Prices Are At Record Instability

May 25, 2023

By Cole Zaferakis

It seems like every few months there is a new story about a shortage of something in America. Things like eggs, chicken and baby formula were all in the news this past year with fears of shortages. The COVID-19 pandemic triggered several shortages in early 2020.

This potential shortage, however, is not just caused by the lasting effects of COVID-19, but rather a multitude of reasons. There are several factors that go into a food shortage, almost all are out of the average farmer’s control.

The production of corn spans through many different intersecting industries, and if this potential shortage does happen, the results will be catastrophic. 2022 was one of the most unstable and unpredictable in terms of prices. While the prices may seem to be stabilizing in the off season, there is no telling what might happen when it comes time to harvest. Corn may be up next on the list of potential food shortages, experts may fear.

Corn Is King

Corn is the most widely planted crop in America, with over 90 million acres dedicated to its cultivation in 2022, according to the United States Department of Agriculture. Ohio is ranked 8th in the country in corn production. Ohio produces around 147 million tons of corn, just about 30 million more tons than the third leading corn producing country, Brazil.

The War and Nitrogen

In order to support corn growth, farmers must purchase and use fertilizer. Specifically for corn, nitrogen fertilizer is most commonly used.

The use of nitrogen fertilizer boosts yields for all sorts of crops like corn, Winter wheat, Spring wheat and cotton. According to the USDA, farmers fertilize corn the most in the Spring season, using 50% of nitrogen compared to other crops. Nitrogen fertilizers come in multiple forms, such as ammonium nitrate and ammonium sulfate.

Fertilizer helps ensure a farmer’s crop stability. By shaking up the supply of fertilizer, uncertainty begins to creep in. The less available fertilizer is, the less stable a crop harvest will become.

Petroleum is Behind It all

Petroleum and natural gas are absolutely essential in most industries, but even more so in farming. From powering machinery to providing heat for livestock and being used, these fuels offer numerous benefits to farmers. The issue arises when

Natural gas is the first ingredient in the production of all nitrogen fertilizer. Through simple chemical and mechanical processes, the natural gas is refined into a cost effective fertilizer.

The most obvious use of petroleum on farms is fuel for the equipment. Just like someone would fill up their car with gasoline, farmers fill up their equipment with diesel. Diesel is made from crude oil, which is mainly produced in, you guessed it, Russia.

Similar to how fertilizer prices spiked in August of 2022, diesel prices jumped to record highs at that same time. Diesel prices reached a nationwide average of $5.70 per gallon, a whole dollar higher than the 2008 recession. The price has been on a slight decline since then, but there is no telling if this trend will continue.

Diesel does not necessarily have to be made from crude oil imported from other countries, it can also be made from biomass. Biomass can be made from many different things, but corn is typically the main ingredient. Similar to how gasoline today has some ethanol mixed in, diesel can do the same with B20 biodiesel (20% biodiesel), all the way up to B90 or B100 (90% and 100% biodiesel respectively).

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