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[00:00:00] Mike Howell: The Dirt with me, Mike Howell, an ekonomics podcast where I present the down and dirty agronomic science to help grow crops and bottom lines. Inspired by ekonomics.com farming’s go-to informational resource. I’m here to break down the latest crop nutrition research use, and issues helping farmers make better business decisions through actionable insights. Let’s dig in.
Listeners, welcome back to the Dirt. We’re glad you’re tuning in this week. We’ve got a familiar face in the studio with us today, we have Mark Tully back with us now. If you’ve been listening very long, you’ve heard Mark on the program several times already this year. Mark, welcome back and for our new listeners, if you will introduce yourself and let ’em know what you do for us.
[00:00:57] Mark Tully: Thanks Mike. Great to be back on the dirt. And for the listeners who haven’t heard me yet, I’m part of our global market economics team here at Nutrien. I lead our fertilizer economic analysis along with a lot of the macro economic work that we do and over the years have been focused on crop commodities as well.
So really my is watching all things agricultural economics and supply and demand, and on here today to have a chat about those economic situation that growers are facing today.
[00:01:27] Mike Howell: Mark, we really appreciate you coming on. We always get a lot outta your insights. I’ve been traveling a lot this year.
Everywhere I go, I seem to hear the same topics coming up over and over again. Everybody wants to talk about the low prices that are being offered for our grain crops, corn, soybeans. There’s just not a good cost coming back for those. And then the input costs are really high this year, going into 2026.
Obviously this is gonna be a big concern for producers, but there’s a lot of things that are gonna play into determining what the prices of these are going to be today. I wanted to spend a few minutes and kind of break down this into some bite-sized pieces that our listeners can understand and see what all goes into this.
So let’s take a few minutes and kind of break this down. So, mark, let’s start off with crop prices. They kind of seem to be low, and the forecast models that I’m looking at aren’t too encouraging. Seems that there has to be more to this than just supply and demand relationships. So what’s happening that’s keeping these prices suppressed at this time?
[00:02:24] Mark Tully: It’s a great question, Mike. First off, let’s acknowledge how tough the market is right now. Farmers are up against these low crop prices. It’s impacting incomes, and it’s a function of really broad global pressures today that are impacting those commodity markets. I think it’s important for our listeners who maybe aren’t following.
The crop commodity markets really closely to understand and recognize that these are globally traded commodities, and it really is supply and demand. That’s the biggest factor in driving crop commodity prices. I liken it to other big commodities that folks are probably super familiar with. Oil and gas, gold, other precious metals.
Items like that, right? Where we understand that as supply goes up and demand increases, we get a price response. And the same is true for crop commodities. And it’s not just what’s happening in the local market in North America, it’s really that global inter dynamic at play that drives a lot of that pricing that we even see in the local markets.
But ultimately, the biggest factor for crop prices today is a simple one. Supply is really big and strong. Starting back earlier in the year, we had a huge Brazilian crop that got harvested for both soybeans and corn. And then we’ve had record yields or are expecting at least record yields today for the corn crop in the United States and pretty healthy yields for the soybean crop.
And it looks like a big crop is coming outta the ground here as Harvest is rolling along in North America, there’s just a lot of crop that has to be marketed both domestically and internationally today. That’s. Putting pressure on crop prices. I think one thing that is really important to note though, is that if we look at inventories around the world for key grains, and so we exclude the big exporters like the United States and China, who tends to keep really big stocks all the time, everywhere else has historically tight.
Grain inventories today. That’s one thing I think about heading into 2026, is if we were to see a supply challenge and pretty healthy demand here over the next few months, we could rapidly see crop prices improve in that scenario. My view is that while the markets could be volatile and we’re seeing challenging prices today, there’s probably more upside than downside moving forward, particularly if we do see a supply shock over the next few months.
[00:04:40] Mike Howell: Mark, that’s some good news for a change on the supply side. Costs seem to be higher than 20, 25 budgets in most cases. What’s the factors that are driving these input costs higher?
[00:04:51] Mark Tully: Typically in these situations. It’s a multitude of global factors that are driving these increased costs, and it’s a typical situation.
We’re seeing a whole bunch of things driving these input factors up this calendar year. And it’s happening all over the world. And so one of the first things I go back to is just general inflation. We’ve seen the pace of inflation slow, but prices are sticky at high levels much higher than what we’d experienced before across many products and services.
And I have a little hobby farm in acreage myself, and I get shocked when I go looking at pieces of equipment or parts for my equipment or chemicals for my little location. And so I can only imagine somebody that’s rolling thousands of acres in the. Price response and the challenge they’re facing today.
But the big thing I look back on is when we think of the first half of this calendar year, so January to June, 2025 in the North American market, we experienced a lot of volatility in input prices. We had that first round of tariffs come in. There was a whole bunch of uncertainty around supply for a number of key input products.
And given that high level of uncertainty. Retailers and farmers manage the risk by waiting to purchase those inputs and purchasing on a just in time basis for the cropping season. Ultimately, I think that was a sensible choice to make, but it did result in some price run-ups ahead of this planting season because the supply chain had to manage moving a lot of product in a short period of time.
There were some supply challenges when we think about the flow of imports and the availability of product for that season, so. In combination. I think that all resulted in just some higher than expected costs for that 2025 crop.
[00:06:29] Mike Howell: Mark fertilizer is one of the inputs that’s being criticized for increased cost of production.
How does fertilizer compare with input cost proportionally compared to previous years and what’s driving the price movement in fertilizer?
[00:06:43] Mark Tully: We’ve seen some volatility in fertilizer this year, and it’s been a higher priced input. Compared to what we experienced last year, I think of it on the ratio of production and the revenue for the grower.
So the first thing I think about, and I’m gonna use corn as an example, in the United States on a per acre basis, fertilizer on average accounts for about 16% of corn revenue. That assumes, you know, an acre that sees normal average US yield performance. So I’m not talking about the. Top of the top 300 bushel an acre corn in Iowa, talking about the average acre across the United States in 2025.
That cost of fertilizer was about 17% of corn revenue. So up a little bit relative to the average, but way, way lower than some of the worst years we’ve seen, and not quite frankly, that out of whack relative to corn prices. When I think of 2008 and 2022, some of those like really expensive fertilizer years, it was about 20 to 25%.
Of corn revenue. We’re just at 17% point today. So certainly the relationship’s a little bit higher than average, but not that out of line when we think about it from a historical perspective. But fertilizer prices have remained much stronger than normal through the summer months because of a number of geopolitical challenges.
I do think it’s in line with that normal share of revenue, but I think what would be important for the listener just to understand a little bit, is what is driving some of that volatility and higher prices. Across each one of those key fertilizer segments as we head into the fall application season and the 2026 crop.
So if you’ll indulge me, Mike, I’ll maybe do a little bit of a walk around the world here for the different macronutrients. I’ll start with nitrogen. The primary cause of the higher prices in nitrogen this year have been unexpected supply challenges. We can go through a long list, but whether it’s the disruptions from the conflict in Russian Ukraine, the 12 Day War in the Middle East, that resulted in outages in Egypt and Iran for periods of time, unexpected outages in Middle Eastern production.
Today, even as plants have outages and then there’s trade policy changes, I look. Chinese urea. Export restrictions is a big player in the marketplace in 2025, and when you add all that up in combination, we just had a lot less supply than we anticipated for 2025, and we had prices respond and move upwards as a result of that.
When I look at North America just in a vacuum, we had historically high corn acreage, which required. Higher nitrogen applications. This was combined with a slower pace of US imports and a higher pace of US exports because of some of that lack of supply availability in international markets that actually resulted in net imports into the United States.
From a nitrogen fertilizer perspective being down about 25% from average in this last fertilizer year, we had a historically tight nitrogen situation and what would be one of the strongest. Years from a nitrogen demand perspective, when we think of the big crop that we put into the ground in North America too.
So when you add in those international storylines with the domestic storylines, that was the big driver of some of that volatility and price that we saw in nitrogen. The one thing I’ll maybe leave listeners with on the nitrogen front is international supply in the last few weeks here has started to improve, particularly for urea.
And so we’ve actually seen a decline in wholesale. Level urea prices all over the globe, but also in North America. When we think of the US Gulf being that big import hub for urea prices, there are down about 20% from the peak prices we saw in midsummer. Not to suggest that we’re necessarily gonna see the prices flip the switch overnight, all over North America, but certainly indicative of supply improving today.
I’ll pivot to phosphate. The big issue we still see in phosphate today, and it’s been a multi-year issue, is just reduced supply, and it primarily stems from a lack of availability from China. China used to be the world’s largest exporter of phosphates, exporting around 10 million tons of DAP and MAP to the global marketplace.
They’ve put in place export restrictions now that are limiting the amount of supply to the global market, and in 2025. It’s probably gonna be less than half of that historical 10 million ton number that’s getting to the marketplace, and there’s just no other producer in the world that can cover that supply gap in such a short period of time.
So that supply tightness and phosphate is gonna drive higher pricing in the global marketplace as a result of that. The other piece I’d add to that story is another. Import one in the United States. There’s just been a slow import pace into the US this year, and so when we think about total US supply really tight inventories of phosphate heading into the fall here and into 2026 as well, that’s not just the United States.
A lot of big import countries are facing the same challenge because of that lack of supply. I think of Brazilian MAP. Imports are down. A big chunk year over year inventories in India still remain really, really tight for DAP. It’s not a US specific story, but more of a global one when it comes to phosphates.
Last product to talk about potash, in my view, this is the one that tells a little bit of a different story than nitrogen and phosphate. This is the one that’s been a demand driven market. In 2025, I expect record demand. This calendar year for Potash, largely driven by really strong demand in Asia and Southeast Asia, where we see really healthy crop prices for things like palm oil and the affordability is really strong there, and a need to apply more potash from a yield perspective in that region of the world.
I expect global demand for potash to be somewhere between 73 and 75 million tons this year, which would be a record. There hasn’t been a lot of supply challenges for potash this year. There’s been a couple small ones. From some smaller international producers in places like Laos and Chile, but it’s really that record level of demand that’s just keeping the market somewhat tight.
And when I mean somewhat tight, we’ve just really seen some slow steady increases in the pot ash price over the full calendar year, unlike the volatility that we’ve seen in nitrogen and phosphate. And that kind of leaves me with where potash price is today, and they’re actually right in line with long-term averages while the basket.
Fertilizer, I think is a little bit more expensive than normal. That’s 17% of revenue instead of 16% of revenue for corn. Potash in particular, appears to be priced right in line with where the crop quantities are today as we head into the fall season and into 2026.
[00:13:05] Mike Howell: Mark, we’ve mentioned that there’s a lot of factors that go into crop production budgets, things like interest rates and land prices, equipment all play a role.
Can you talk a little bit about these and some other factors that are impacting these planning budgets as people are getting ready for 2026?
[00:13:20] Mark Tully: Yeah, for sure. Mike, here’s the part of the podcast where I throw some numbers at folks, and so hopefully they can bear with me while I do that. So I mentioned that 16% of corn on average from a revenue perspective for fertilizers, and this year it’s about 17% of the 2025 crop.
So growers on average take about 45% of the cash margin on that. Corn per acre. I’m excluding some of the big fixed costs and I’m excluding things like land from that number. So that leaves us with about all other costs, excluding fertilizer being around that 33% of corn revenue on average, keeping in my cash costs here.
Talk about some of those fixed costs later in 2025, we’d estimate that those other costs. We’re about 38% of US corn revenue on average, so we did see some inflation across all other inputs that growers are using too. Those other cash costs I’m thinking about are insurance interest rates. How expensive maintenance on building and equipment has become those parts labor.
All of that adds up and is becoming more expensive for the farmer, and all plays a role in that input cost and incomes. When I think about those bigger fixed costs too, those have become more expensive. I think about the higher price of land and the higher price of equipment and the impact that’s having on grower budgets.
As an example, when I think about land inflation, I think this is a really big driver of the overall farm income in the calendar year 2025. We think about that last land cycle of 2020 through 2025. The American Farm Bureau Federation puts average crop land prices up 44% per acre over that period of 2020 to 2025.
And the average cash rent on crop land up 16% during that same period. And while we know there’s a wide range of structures when it comes to ownership of land across the farm. There’s gonna be operations that have considerably higher inflation than that average level, and certainly some that are lower than that.
But all of that is constraining the farm budget when we think about the 2025 crop. But all that inflation on top of that to me, has resulted in a, a. More structural shift in the cost of production, and I think about it like this on a per bushel basis, and we’ll use US corn as an example. When we think about break even prices over time and we go back to 2020 and then compare it to 2025, I think depending on the acre, that cost is up 50 cents to a dollar per bushel, and in some cases without some significant deflation, that’s gonna be more structural in nature going forward.
[00:16:01] Mike Howell: Mark. Earlier this year we had you on and we talked a little bit about the situation with tariffs. I’m not hearing nearly as much talk about tariffs these days, but can you give us an update about where we stand with the tariff situation and how that’s impacting our economic situation?
[00:16:16] Mark Tully: Yeah, that’s a good question, Mike, and I think we’re probably not hearing as much today just because we’ve got a little bit more certainty versus the significant uncertainty that we had probably for the first six or seven months of this calendar year.
I’ll hit on a few points for our listeners on the tariff piece. First one being earlier this summer, the baseline tariffs came into place in the United States. That’s a 10% tariff rate on imports, and that baseline can be overruled by a number of country specific rates that can range, depending on the country, around 15 to 40%.
And the intention of that is to rebalance trade. And reciprocate against unfair country specific trade regulations against what were US exports. Then there’s a number of specific product tariffs, so think about automobiles or copper. Those are in place. On the flip side, several countries have implemented their own reciprocal tariffs against the United States.
For example, China. Has duties in place against a number of US products. All of this in combination is impacting trade flows and the supply of really all sorts of imported and exported goods outta the United States today. I’ll hit on agriculture here specifically. It’s a pretty broad based impact that we’re seeing today.
Some of that retaliation from trade Partners is importing exports for crop commodities. The administration is using the tariffs as a tool to get some trade deals done with these nations, and so ultimately that could open up some new markets for growers. As the year progresses, a number of crop inputs are excluded from tariffs.
So I think about all Canadian fertilizer imports are excluded from tariffs today. Potash generally remains tariff free. A large percent of crop chemicals, you know, about 80% of. What’s normally used in the US is excluded from tariffs today, so a lot of the key inputs aren’t necessarily facing specific duties impacting price itself.
Last piece on the tariff front, Mike, is in November, the Supreme Court’s gonna hear some arguments against the administration’s use of tariffs. Pretty likely that we continue to see some uncertainty around tariffs for the foreseeable future until all of this moves its way through the US government legal system.
[00:18:21] Mike Howell: Mark, you led me into my next question, and I’m hearing a lot of talk about grain exports and how we’ve lost some of our trade deals with other countries. Is it a possibility that we can get some of these deals back? Are there other partners out there that we could potentially get some trade deals going with something to help work through this big supply situation that you talked about?
[00:18:41] Mark Tully: It’s a good question, Mike, and the trade landscape remains highly uncertain today with the reciprocal tariffs impacting the US export. But like I said, the administration is highly focused on creating new trade deals with partners. One of the big things has been the reduced sales to China so far because of some of those Chinese reciprocal tariffs, and they’re buying a lot more from Latin America today.
In fact, China’s purchased almost zero tons of new crop US soybeans, and that has been covering their. Really strong import demand of soybeans, really all from Brazil so far. But like I say, the US is working really hard to get trade deals done with a number of nations, including China. And so we could see the pace of agricultural exports change pretty dramatically as some of those deals get done.
There’s been examples of that so far when we think about announcements of US trade partnerships with. The EU and the UK of late and that could provide some new markets for US ag and that’s certainly been a key discussion point in those trade deals so far. But I don’t wanna leave us all with some of the challenges that the grower’s facing.
’cause it isn’t all bad news. If I think about US corn export sales for the new crop, they’re up 68% year over year and they’re approaching record levels that we saw in 2021 in terms of. The pace of exports for new crop corn. There actually is some really strong demand for US exports still today. What we tend to see in these low priced crop commodity market environments is it attracts demand because the crop is more affordable.
And when I think of the high priced crop commodity market. Windows that we saw going back to 2020. And really up until this calendar year, we saw some stagnation in global demand, particularly for grains and oil seeds because of the affordability level for a lot of those markets that import products.
And I think there’s a potential that we see a reversal. Of that trend because of the lower crop prices today. And we see some really strong demand as we move through this marketing season and an opportunity for not just the US grower, but all growers who are in export regions to take advantage of that opportunity.
Lastly, I’d leave us with while the US grower. Is really well positioned to service international markets. It’s not just an export story when we think about demand for the US crop, in fact, there’s a lot of domestic demand available in North America. And one of the things we’re watching today is we’re seeing really strong crush numbers for soybeans domestically in the us.
The one big beautiful bill from the current US administration has opened the door for. The potential for some really strong biofuel use, particularly for soybeans as we move forward here. There’s also growing support for year-round E 15, which would result in higher domestic demand for corn in particular.
So not just all an export story. My point, and I think there is some really healthy demand opportunity domestically too.
[00:21:31] Mike Howell: Mark. I’m gonna throw one more question out there. What in the world is going on with the cattle markets these days? Every time I look at something, the cattle markets are going up every day, a new record every day.
How does that factor into everything we’ve been talking about today?
[00:21:45] Mark Tully: Well, the cattle markets. Again, as the economist in the room here, supply and demand, that’s our driver. What we’ve seen in cattle markets is a reduction in herd counts, particularly in North America as we’ve just gone through that cycle of the herd, moving into slaughter, being turned into beef, and getting sold into market.
And so we have some much lower levels of cattle on feed today, and that’s just driving some of that higher prices that we’re seeing for cattle because. The supply is tighter than what it’s been historically. The one thing as we look to the really high prices, like you say for cattle, is it provides really strong margins for those ranchers and producers of cattle and really good opportunities to increase the feed demand.
As the herd headcount moves up when we see the cattle prices as high as they are and really grain prices as low as they are. That’s a pretty attractive opportunity. When we think about the feed margin there and the feed demand, you just have to have the headcount in place to really see that move through in big chunks.
And so I would expect that the market’s doing what it’s supposed to be doing with those high prices, trying to drive another supply cycle and growth in that herd.
[00:22:56] Mike Howell: Okay. Well Mark, we sure have covered a lot of ground today. I really appreciate you taking time to go over this with our listeners. Is there anything else that you think we need to cover before we wrap things up today,
[00:23:06] Mark Tully: Mike, I think we’ve covered a lot today, but one of the things I just wanted to leave our listeners with, at least from myself, is I was heading to bed last night. And I saw my neighbor’s combine rolling, and as I was turned off, the lights, those headlights were still out in the field late, late at night. And so I know many of our listeners are working hard in the fields right now and pulling out that crop and just wanna wish folks a safe and healthy and successful harvest this season and appreciate the effort that they put into really feeding everybody around the world.
[00:23:37] Mike Howell: That’s exactly right, mark. We need to stop and slow down just a minute. And remember, safety. This is a extremely dangerous time of year around the farm, and we want everybody to make it home safe every day. Mark, once again, thanks for being with us today. Listeners, we appreciate you tuning in and if you’ll hang around for just a few moments, we’ll be right back with segment two.
Farming Isn’t Farming without questions, and now there’s a place to go for answers. At economics, an entire team of agronomists is waiting and ready to help for free. No question is too big or too small. Visit Nutrien-ekonomics.com and submit your question with the ask an agronomist feature.
Listeners, welcome back for segment two. Today we have Dr. Alan Blaylock back in the studio with us to ask our weekly ask an agronomist question. Alan, welcome back.
[00:24:28] Alan Blaylock: Thanks, Mike. I love these sessions. It sometimes throws a curve ball at me, questions that maybe haven’t been asked quite that way before, and these are real world questions that are coming in from our customers and other viewers of our website.
So it’s interesting to engage with these questions.
[00:24:42] Mike Howell: Alan, this week’s question kind of goes along with our fall fertilizer questions that we’ve been doing here the last few weeks. What about lime? When do we need to look at making these lime applications? Is it better to make those applications in the fall or do we need to wait until the springtime for those.
[00:24:58] Alan Blaylock: Well, I think Mike, probably the best time to get those on would be in the fall. When we apply lime, what we’re trying to do is neutralize the acidity in the soil and that lime is calcium carbonate, and that needs a chance to dissolve, and it’s going to dissolve in the presence of soil acidity. And that can take some time, like some of our discussions about.
Other materials. We’ve talked about sulfur and the importance of particle size and sulfur forms, and how particle size plays a role in choosing those forms. Lime is the same way. Foreigner particles dissolve faster, they’re effective more quickly, but we want to give more time for that lime to interact and chemically neutralize the acidity in the soil.
And so applying that further in advance of when we want that change to be effective for the crop. It just makes a lot of sense. If we applied in the spring, it may be midseason before that really starts to get going. Well, if we really needed that lime, we may have affected that crop adversely while we’re waiting for the lime to be active.
So I would prefer to apply that in the fall and, and also it’s easier to get out in the field. Usually in the fall, we often have drier soil conditions, so less compaction with those heavy trucks running over the field. And I think there’s a number of advantages to applying lime in the fall as opposed to in the spring.
But most importantly is we get that lime on and get the job done and take care of our soil pH ’cause that’s a really critical soil property.
[00:26:19] Mike Howell: Alan, I couldn’t agree more. We need to make sure we get that line put out in the fall if we can, and if not, we can still do it in the spring, but make sure we get it applied.
Alan, thanks again for giving us your advice on this. Listeners. Thanks for tuning in this week, and as always, if you have any questions about anything we’ve talked about, you can visit our website. That’s Nutrien-ekonomics.com. Until next time, this has been Mike Howell with the Dirt. Hey guys, if you like what you heard today, do us a favor and share this podcast with someone else.
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