Is Fertilizer Worth the Cost?
With continued high costs, producers are asking if it is worth applying fertilizer. To borrow a line from our economist friends, "it depends." The real question is if the value of the additional production we get from fertilization is enough to cover the expense and generate more net income than what we get without fertilizer. That will depend on the type of operation, how production is marketed, the inherent productivity of the land and the operational efficiency.
Use the following simple formula to evaluate potential return to fertilizer.
In many cases, the most difficult steps are estimating the amount of additional production there will be and its actual value. The same formula can be used to evaluate potential return to any additional input.
In our first example, we will use a small-grain, graze-out stocker operation and assume that weather, soil pH, pest pressure and other nonfertility factors are not yield-limiting. Assumptions are that the value of gain is 90¢ per pound and it requires 10 pounds of quality winter forage to produce 1 pound of gain. Two thousand pounds (one ton) of forage divided by the 10 pounds of forage required for a pound of gain equals 200 pounds of gain. Multiply 200 pounds of gain by 90¢ value of gain to arrive at a value of $180 per ton of forage.
If phosphorus and potassium are not limiting, it will require approximately 60 pounds of actual nitrogen to produce an additional ton of forage. Assume 61¢ per pound nitrogen ($560 per ton 46-0-0, urea) and $4 per acre for application resulting in a fertilizer cost of $40.52 to produce 1 ton of forage. The $180 forage value minus $40.52 fertilizer cost equals $139.48 return to fertilizer. Now if 60 pounds per acre phosphorus ($1,160 per ton 18-46-0, DAP) and 60 pounds per acre potassium ($865 per ton 0-0-60, potash) are needed, the fertilizer cost increases to $145.18 to produce the same gain. The return to fertilizer costs drops to $34.82. One must remember that these are only returns to fertilizer and they must cover all costs associated with the additional production.
In our second example, we will use a bermudagrass hay producer putting up 1,000-pound, net-wrapped bales and we will again assume that other nonfertility factors are not yield-limiting. The hay is advertised as high protein, weed-sprayed and fertilized, so it is selling for $50 per bale. Multiply two bales per ton to arrive at a value of $100 per ton.
If phosphorus and potassium are not limiting, it will require approximately 50 pounds of actual nitrogen to produce an additional ton of hay. Using the same fertilizer costs as the first example, the fertilizer costs are $34.43 for an additional ton. One hundred dollars per ton hay value minus $34.43 fertilizer cost equals $65.57 return to fertilizer. Again, this is only a return to fertilizer and must cover the cutting, baling, hauling and any other costs associated with the additional production. Now if the same amounts of phosphorus and potassium are needed, the fertilizer costs increase to $139.09 to produce the same hay. The return to fertilizer becomes a negative $39.09 per ton.
One lesson to learn from these examples is that it is difficult to justify fertilizing if the phosphorus and/or potassium are deficient. That includes nitrogen fertilizers because phosphorus and potassium deficiencies reduce the nitrogen response. The only way to know if phosphorus and/or potassium are deficient is with a soil test. It is important to remember that the value of additional production has to pay for the fertilizer AND all the other costs associated with that additional production. Knowing the value of production and its associated input costs allows you, as a producer, to make an informed decision before spending those input dollars.