Are you overspending on fertilizer?

By: Brad Carlson, Extension educator

The FINBIN database summarizes farm financial data from thousands of farms involved in Minnesota farm business management programs. What does the data say about fertilizer costs for the most profitable farms versus the least profitable farms?

Fertilizer cost comparison

Beginning in 2016, I decided to look at fertilizer expenses on a per acre basis in the FINBIN database to see if farmers were overspending on fertilizer. I looked only at corn acres (both rented and owned) for the southeast, south central, southwest, and west central parts of the state (the primary corn producing areas). Because assigning cost to manure is complicated and individual farms use different methods, I excluded all manure users.

What I discovered in 2016 was that the 20% most profitable farms’ fertilizer costs averaged $138 per acre while the 20% least profitable farms spent $177 per acre – a 28% difference.

My first inclination was that maybe the least profitable farms simply overspent on everything, but that did not appear to be the case. My next thought was to see whether this was a case of larger farms getting a price break on product due to larger purchases. If this was the case, the area you would expect to see the biggest difference would be for seed. However, the cost difference between the two groups for seed was only 11% in 2016.

I have continued to track the reports annually and the results have been relatively consistent over the years, with the least profitable farms between 2017 and 2022 spending 15-30% more on fertilizer per year than the most profitable farms. For comparison, the difference in seed cost averaged 0.5-12% more per year.

FINBIN’s recently released 2023 report shows that the most profitable farms spent an average of $217 per acre on fertilizer for corn while the least profitable farms spent $289 per acre. This is a whopping 33% difference, the largest since I started tracking the data. The difference in seed cost last year was only 10%.

Table 1. Fertilizer costs per acre, 2016 to 2023 (FINBIN)

Year	20% most profitable farms	20% least profitable farms	How much more least profitable farms spent
2016	$138	$177	+28%
2017	$107	$134	+25%
2018	$108	$131	+21%
2019	$106	$138	+30%
2020	$118	$146	+24%
2021	$128	$147	+15%
2022	$198	$256	+23%
2023	$217	$289	+33%

Note: fertilizer prices increased substantially starting in fall 2021.

What’s behind the difference?

The obvious next question is, what is contributing to this large difference? Because the FINBIN database is financial, we do not know the specific practices separating the two groups. However, based on my 30 years working with farmers on improving nitrogen management practices, here are six possible factors:

1. Applying too high of a nitrogen fertilizer rate: Obviously, applying fertilizer that the crop does not need will be wasted money. If you are applying rates higher than the U of M’s corn fertilizer guidelines, have you validated your decision with field trials? If you are basing your rate decision on a calculation of 1.2 pounds of nitrogen (N) per bushel of corn produced, realize that the current analysis of corn grain based on protein is about 0.6 lb. N per bushel. Also know that hundreds of rate trials conducted by the University of Minnesota have established that there is not a linear relationship between N rate and yield. This is because there are frequently other factors limiting yield that have nothing to do with nitrogen, as well as the soil having the ability to supply very large amounts of N, lessening the need for fertilizer inputs. Using the Corn Nitrogen Rate Calculator is a great way to pick a profitable nitrogen rate.

Graph 1: These research results from Dr. Fabian Fernandez from 2014 show a calculated Economic Optimum Nitrogen Rate of 127 pounds of nitrogen per acre. Increasing applied fertilizer from 120 lbs. N/acre to 160 lbs. N/acre resulted in 40 lbs. of additional residual soil nitrate left in the soil. In other words, adding fertilizer beyond what the crop needed left it pound for pound in the field. 

2. Increasing N rate to mask bad application choices: Soil fertility best management practices are well established for application timing and the type of fertilizer to use. What we often see happening is that when one best practice is disregarded, application rates are increased to make up for the lost fertilizer. (Example A: why we do not recommend applying urea in the fall.) This is a bad situation for the individual farmer due to unnecessary expense, for the industry because of the downstream consequences of the lost fertilizer, and for society as a whole, which bears the burden when nitrogen fertilizer is lost to air and water.

3. Applying P and K crop removal rates when the soil test is already high: There are many who think that it is good business to replace what is removed by the harvested crop. This makes sense in theory, however, research has established no yield advantage in raising or maintaining soil test values of phosphorus (P) and potassium (K) that are in or above the high range. Furthermore, a recently completed long term phosphorus study determined that applying crop removal rates of P will actually raise the soil test value rather than maintain them. The research showed that an average of only 33% of crop removal was necessary to maintain soil test value.

4. Split-applying nitrogen in situations where there is no advantage: The main purpose of split-applying nitrogen is to avoid nitrogen loss from a fall or spring pre-plant application. There is no such thing as “spoon feeding” a crop; the N is either there or it isn’t. If you applied it and it wasn’t lost, the plant does not care when it was applied (last November or yesterday). Split application is a recommended practice in sandy soils that are prone to nitrogen loss. Additionally, split application can be used as a method when delaying making an overall rate decision or when making a full rate application prior to planting is difficult (such as with strip-till). Fields that are not at significant risk for N loss will not see an advantage for split-application and doing so simply doubles the application cost.

5. Using premium, or “enhanced efficiency” fertilizers or products to make natural soil fertility “more available”: Research has not clearly shown that these products work consistently. If they do work the way they are advertised, then they would reduce the need for applied fertilizer. Unfortunately, most farmers that try these products still apply their full rate, defeating the purpose and adding expense. Unnecessary micronutrient fertilizer application also falls under this category. (Note, polymer-coated urea is not advertised as “enhanced efficiency” but rather as a product used to mitigate N loss and therefore does not fall in this area.)

6. Buying a fertility advisory technology that does not pay for itself: Some of the practices that fall under this category include using drone imagery, in-season soil sampling, tissue testing and computer models. Research has shown that many of these technologies do work, however, my experience has shown that they most frequently identify where fertilizer rates need to be reduced rather than increased. When rates are reduced, yields are not increased, meaning that the only way for the technology to pay for itself is to cut cost by applying the recommended (lower) fertilizer rate. It has been my experience that many farmers have been reluctant to do this, meaning they paid for advice that they didn’t take.

Conclusion

FINBIN data shows an eight-year (and probably longer) track record in Minnesota of the least profitable farms overspending on fertilizer. Coupled with this is the observation that many farmers do not engage directly in their soil fertility decisions, but rather turn them over to those selling them product. These numbers suggest that it is probably time for many farmers to more closely examine how they spend their fertilizer dollar and make adjustments.

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