Crucial Commodity Is up 300% and Still Going

Written by Jason Simpkins
Posted December 17, 2021

There's no question higher prices are a problem for everyone.

But right now, I'm especially focused on one group of people who have one particular problem.

Farmers.

Farmers are at the center of the global food supply chain, which makes them pretty important in my book.

And right now they're struggling with soaring costs for a crucial commodity, which is fertilizer.

Indeed, while the benchmark Green Markets North American Fertilizer Index has risen by 265% since May 2020, farmers in some areas are reporting price hikes of more than 300%.

This is part of the reason we've seen such an outrageous rise in our grocery bills.

Yes, grocery prices are now at record highs, having jumped 6.4% over the past year — the biggest climb since December 2008.

Beef prices have led the way with a 20.9% increase, while ground beef prices have risen 13.9%, milk prices are up 4.5%, bacon costs 17.8% more, and eggs are up 8%.

Even in just the past month these staples have seen their prices soar significantly higher:

  • Lettuce: 6.9%
  • Pork products: 3.7%
  • Fresh sweet rolls, coffee cakes, doughnuts: 3.5%
  • Dried beans, peas, lentils: 3.1%
  • Salt and other seasonings and spices: 3.1%
  • Hot dogs: 2.8%
  • Breakfast sausages and related products: 2.7%
  • Pork products: 2.2%
  • Oranges: 2.4%
  • Fresh fruit: 2.2%
  • Ham: 2.1%
  • Beef roasts: 1.8%

Obviously, not all of these products require fertilizer, but the grain that goes into animals' feed does. And that's seen a surge in price, as well.

Since the beginning of January to this week, the December 2021 corn contract has risen 34.5%. This, despite bumper harvests and weaker exports.

And why?

Because of higher input costs, i.e., fertilizer prices.

And fertilizer prices are up because their components' prices are up.

According to the American Farm Bureau, every major nutrient used in the production of primary row crops — nitrogen (anhydrous ammonia, urea, or liquid nitrogen), phosphorus (diammonium phosphate, or DAP, and monoammonium phosphate, or MAP), and potassium (potash) — has skyrocketed over the past year.

Basically what happened was that demand plunged as COVID closures erased huge portions of the supply-demand chain. But then, as soon as things kicked back up, demand shot back far more quickly than production.

Making matters worse, during the February freeze throughout Texas, natural gas production was interrupted or shifted away from regular uses and rerouted due to the demand spike. This forced U.S. ammonia plants in Oklahoma, Texas, and Louisiana (which account for about 60% of production) to shut down, cutting out roughly 250,000 tons of production. Hurricane Ida then hit those same areas and production was paused again.

As a result, ammonia has increased over 210% since September 2020, liquid nitrogen has increased over 159%, urea is up 155%, MAP has increased 125%, DAP is up over 100%, and potash has risen above 134%.

But that's not all.

Widening out, the average price of each nutrient is also significantly higher than it was in 2008. Over that 13-year period, anhydrous ammonia is up 118% above its average of $656 per metric ton, urea is up 101% from its $453 per metric ton average, liquid nitrogen is up 84% from its $305 per metric ton average, DAP is up 50% from its $550 per metric ton average, MAP is up 61% from its $555 per metric ton average, and potash is up 61% from its $485 per metric ton average.

This is a problem — not just for us, but the entire world.

But now here's the good news...

My colleague Luke Burgess recently uncovered a small company that's sitting on one of the world's most important fertilizer mineral deposits. In fact, it's so big that it could help supply the world for centuries to come.

Better still, he just released a massive report on this special fertilizer mineral and the company behind it, which you can get here.

I highly recommend it because this crisis isn't going away anytime soon.

Fight on,

Jason Simpkins Signature

Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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