MSU Extension soil and farm specialists suggest ways to manage rising fertilizer costs

BOZEMAN - Rising fertilizer prices are a concern for agricultural producers, according to Andrew Swanson, Montana State University Extension farm management specialist in the Department of Agricultural Economics and Economics, who, along with MSU Extension specialist Clain Jones, have provided some insight for managing fertilizer costs.

"Even though the U.S. produces the majority of its own nitrogen fertilizer, fertilizer prices are susceptible to global shocks, just like Montana wheat prices can be affected by supply conditions in Australia or Canada," Swanson said.

According to a report from the Center for Strategic and International Studies, approximately 20% to 30% of global fertilizer exports, especially urea, travel through the Strait of Hormuz, trade that has been impacted by the current war. Swanson said trade disruptions have caused current cash urea prices at New Orleans wholesale terminals to rise from $360 per ton in February to almost $650 per ton in March, while urea prices in Montana have risen from $700 per ton to about $1,000 per ton.

Farmers are experiencing tight margins as the price of wheat and other grains has fallen almost 40% since the first year of the Russia-Ukraine War, while input costs remain high. According to Swanson, in a tight margin environment, the most important factor for producers is nitrogen cost per pound. "At $1,000 per ton of urea, a pound of urea costs $0.50. Since urea is 46% nitrogen, a pound of nitrogen costs $1.09 when supplied by urea. This means that each additional pound of nitrogen applied needs to generate at least $1.09 of revenue through higher yields or protein premiums."

One way to track the needed yield gain from urea fertilizer is to divide nitrogen cost per pound by the local wheat price per bushel, Swanson said.

"Golden Triangle prices for 12% protein winter wheat averaged $5.16 per bushel in February and have increased to $5.52," Swanson said. "This means a pound of nitrogen in February costs 0.15 bushels, while today it costs 0.20 bushels. If the aim is to grow 12% protein wheat, each additional pound of nitrogen applied per acre needs to increase yield by 0.20 bushels."

If the Middle East conflict resolves in the coming weeks, Swanson said he still expects price impacts to linger into next year's growing season.

"Typically, major disruptions like this take at least a year to cool," Swanson said. "Urea prices for delivery in late summer are $100 to $150 lower than current prices. A permanent ceasefire could drive those lower but likely not to costs seen before the conflict. One way to manage prolonged elevated prices is by prepaying the local fertilizer supplier. Farmers can often negotiate 5% to 10% price discounts through preordering."

Swanson also mentioned new insurance products. The U.S. Department of Agriculture has now approved margin protection plans for wheat in select Montana counties. This is a more comprehensive insurance product that protects against rising input costs, not just decreases in revenue from reduced prices or yields. Farmers can speak with their local crop insurance agent to learn more.

Clain Jones, MSU Extension soil fertility specialist and professor in the Department of Land Resources and Environmental Sciences, recommends several strategies to optimize dollars spent on fertilizer.

With a range of available fertilizer products, including granular and liquid, it's important to know the fertilizer cost per pound of nutrient. For example, the nitrogen cost per pound of urea could be compared to the cost per pound of nitrogen for liquid nitrogen, which is generally either 28% or 32% nitrogen. As of April 2, liquid nitrogen costs approximately 10% more than granular nitrogen on a per pound basis, according to the USDA Pacific Northwest Production Cost Report. (Similar calculations can be made for adjustments with phosphorus fertilizers.)

"Producers may be asking how much to cut back on nitrogen fertilizer rates based on increased costs," Jones said. "MSU has an online small grains nitrogen rate calculator that uses fertilizer costs, grain prices and protein discounts from the USDA to estimate the optimal available soil nitrogen to maximize profit for spring wheat, winter wheat and barley."

He provided an estimate example using April 2, 2026, values, where a 50 bushel per acre spring wheat crop provides maximum profit when provided 1.8 pounds of available nitrogen per bushel, where available nitrogen is fertilizer plus soil nitrogen to 2 feet. That compares to the optimum of 2.3 pounds of available nitrogen per bushel using early February prices. The difference between applying 2.3 pounds or 1.8 pounds per bushel equates to 50,000 pounds of nitrogen for a farm producing 100,000 bushels of wheat. Producers can use the calculator to calculate optimum nitrogen rates for specific fields, crops and fertilizer costs.

Jones pointed out that minimizing nutrient losses is also important to optimize fertilizer dollars. Volatilization, or loss to the air, of nitrogen fertilizers is likely the largest loss of nitrogen in Montana. Previous MSU research found that, on average, 18% of urea escapes to the air. The loss was much lower when urea was applied shortly before a half-inch of rain fell or when the urea was treated with a urease inhibitor. Liquid nitrogen tends to volatilize somewhat less than granular nitrogen. Placing ammonium-based fertilizers, including urea, at least 2 inches below the soil surface can mostly stop volatilization, according to Jones.

Another potential loss of nitrogen fertilizer is through downward movement below the rootzone, called nitrate leaching. Jones and colleagues have found that replacing summer fallow with pea can greatly reduce nitrate leaching.

Planting legumes, like peas and alfalfa, can also save on nitrogen fertilizer costs because bacteria on legume roots convert nitrogen gas into plant-available nitrogen; these crops don't need nitrogen fertilizer. Rates of nitrogen can also generally be reduced for crops grown after legumes, Jones added.

"Soil testing in spring, using realistic yield goals when calculating nitrogen requirements and applying conservative nitrogen amounts near the time of seeding, followed by more in-season nitrogen only if spring rains increase yield potential, should also save on nitrogen costs," said Jones.

With high nitrogen fertilizer prices, Jones suggested this may be an excellent year for producers to adopt variable-rate nitrogen management. Variable-rate nitrogen allows growers to apply less nitrogen in field areas that do not need as much, either due to lower yield potential or higher residual soil nitrate levels.

Ricardo Pinto, precision agriculture specialist at MSU's Northern Agricultural Research Center, will be working with producers and collaborators over the next several years to better understand how variable-rate nitrogen can improve nitrogen use efficiency and support producers' bottom lines. Producers interested in learning more or collaborating on variable-rate nitrogen projects can contact Pinto directly.

Phosphorus fertilizer costs are also much higher. Phosphorus fertilizer is most efficiently used by crops when it is placed in the rootzone, ideally with the seed, Jones said. "For soils with phosphorus levels well above the optimum of 16 parts per million, this might be a year to apply little or no phosphorus to save on costs."

Individuals can contact a crop adviser or local MSU Extension agent for help making fertilizer decisions.

Questions about farm management and commodity markets may be directed to Swanson at [email protected] or 406-994-5621.

Questions about soil fertility may also be directed to Jones at [email protected] or 406-994-6076 or addressed by visiting the MSU Extension soil fertility website at landresources.montana.edu/soilfertility/.

Questions related to variable rate nitrogen and precision agriculture can be directed to Pinto at [email protected] or 406-994 6374.