Nitrogen, phosphate, and potash are essential in the production
of crops used for food, feed, fiber, and fuel. Applied annually,
most of these nutrients are absorbed by the crop, but when applied
in excess, they can be lost to the environment through
volatilization into the air, leaching into ground water, emission
from soil to air, and runoff into surface water (see Nitrogen in Agricultural
Systems: Implications for Conservation Policy, ERR-127,
September 2011 for more information on these impacts). These losses
can be reduced by adoption of best management practices (BMPs) that
increase the nutrients' accessibility for plant use, enhance
plants' ability to uptake nutrients, and more closely match
nutrient applications with agronomic needs (see the topic on Crop and Livestock
Practices).
Annual Fertilizer Consumption Has Become More Volatile Since
2004
Commercial fertilizer consumption increased rapidly before 1982
as more acreage was devoted to high-yield crop varieties and
hybrids that responded favorably to more intensive fertilizer use.
As global demand for grains grew, U.S. consumption of commercial
fertilizers peaked at 24 million tons in 1981. When grain demand
dropped in 1983, government Payment-in-Kind programs took a large
amount of U.S. cropland out of production, reducing fertilizer
consumption to 18 million tons. Commercial fertilizer use then
trended upward, largely due to increased corn plantings. In 2004,
growth in annual fertilizer use became much more volatile in the
face of rapidly rising fertilizer prices, driven by rising energy
and input material costs. Record fertilizer prices in 2009 reduced
consumption to 18 million tons, a 24-percent decline from 2004. As
fertilizer prices declined in 2010, consumption rebounded to 21
million tons.
Nitrogen fertilizer use has increased more rapidly than
phosphate and potash due to the development of seed varieties with
more favorable yield responses to nitrogenous fertilizers.
Corn--with many planted acres under intensive fertilizer
application--accounts for around 40 percent of the U.S. fertilizer
consumption.
U.S. Nitrogen and Potash Consumption Increasingly Depend on
Imports
Imported supplies of nitrogen have accounted for an increasing
share of U.S. nitrogen consumption in recent years. Fixed
nitrogen production capacity in the U.S. means that increased
consumption of nitrogen fertilizer depends on imports, even though
the U.S. supply of natural gas--a critical component in the
production of nitrogen fertilizers--has been increasing recently.
In 2002, net imports accounted for 19 percent of U.S. nitrogen
consumption. By 2011, net import's share of U.S. nitrogen
consumption had increased to about 50 percent.
The supply of potash in the U.S. has historically depended
largely on imports. More than 85 percent of potash (K2O)
supply was from imports in calendar year 2011. Because domestic
production capacity is limited and has generally declined over
time, any increase in potash demand must be met by imports.
In contrast, U.S. phosphate (P2O5) supply
is mainly from domestic production, which provides over 90 percent
of domestic use. The U.S. is the second largest producer of
phosphate fertilizers in the world (after China), and exported more
than 41 percent of its production in 2011.
Fertilizer Prices Rose Rapidly and Became More Volatile in
Recent Years
From 1960 through 2002, both fertilizer prices paid and crop
prices received by farmers increased in tandem at a fairly modest
rate. Since 2003, annual fertilizer prices paid by farmers have
increased rapidly--generally much faster than increases in crop
prices received by farmers--and have become more volatile.
Fertilizer price increases through 2008 were largely driven by high
energy prices and high input material costs (see Impact of Rising Natural
Gas Prices on U.S. Ammonia Supply, WRS-0702, August 2007;
Factors
Contributing to the Recent Increase in U.S. Fertilizer
Prices, AR-33, February 2009). In response to
record fertilizer prices in 2008, farmers reduced their use of
fertilizers, contributing to a large decline in fertilizer prices
through 2010. But fertilizer prices have started to move up
once again, driven by strong domestic demand for plant nutrients
due to high crop prices, and limited domestic production
capacity.