At the Berkeley Food Institute, we had the opportunity to host Yale School of the Environment Graduate Student, Sara Sherburne, for a summer research project, exploring the impacts of rising fertilizer costs and the state of the fertilizer industry in California and nationally. Below are her findings based on interviews and data review. You can find her full report here.  

For one California grower, organic almonds used to be 10% more expensive to grow than conventional almonds. This year, they’re 20-30% cheaper. 

The reason? It’s something that isn’t often on the mind of the consumer: fertilizer. 

In conventional agriculture, synthetic fertilizers provide the major nutrients that plants need to grow: nitrogen, phosphorus and potassium. Unlike organic materials, synthetic fertilizers are manufactured through industrial processes. In the case of nitrogen – the most important nutrient for agriculture globally – manufacturing is powered by oil or natural gas. 

Though these fertilizers have transformed agriculture, they’ve also come at a cost: soil degradation, water contamination, greenhouse gas emissions, and public health risks. Drinking water contaminated with nitrate has been linked to increased risk of thyroid disease and cancer.

Organic materials like manure and compost contain the same key nutrients as fertilizers. But their nutrient levels are less predictable and work over longer timelines. For growers, synthetic fertilizers are generally easier to access, transport, measure, and apply. They are also typically cheaper.

Why have fertilizer prices gone up? 

In February, the U.S. war with Iran resulted in the closure of the Strait of Hormuz, a shipping channel that handles about one-third of the world’s fertilizer transported by sea. Around the world, including in California, fertilizer prices shot up. In June, California prices for key nitrogen fertilizers were up 43% from pre-Iran prices, according to GreenMarkets. Sulfur, which is primarily used in phosphate fertilizers, was up 142%.

This is the second major shock in four years. Prior to the war with Iran, fertilizer prices still hadn’t recovered from 2021-2022, when supply chain disruptions from the COVID-19 pandemic and the Russia-Ukraine war sent them skyrocketing. As a global commodity, fertilizer prices are driven by geopolitical conflicts like these as well as global supply and demand, energy prices, and trade policies. But there may be another factor impacting fertilizer prices: industry consolidation.

California Fertilizer Price Comparison for UAN, DAP, potash, and urea. DAP is a phosphate fertilizer, UAN and urea are nitrogen-based, and potash contains potassium. Source: USDA Agricultural Prices Summary and GreenMarkets

Fertilizer industry consolidation 

Over the last four decades, the fertilizer industry has grown increasingly consolidated. Just four nitrogen manufacturers now hold approximately 84% of the North American market share — down from 56 firms in the late 1970s. Distribution and retail are consolidating too – just seven agricultural retailers now control 71% of crop input sales nationally.

Industry concentration limits market competition and makes illegal price-fixing – where competitors coordinate to raise or stabilize prices – easier to execute. At the same time, fertilizer companies are increasingly pursuing vertical integration strategies, where they control raw material extraction and manufacturing as well as downstream logistics, distribution and retail. This further consolidates their power and makes it more difficult for smaller companies to compete. 

While farmers paid record prices in 2021-2022, major fertilizer manufacturers recorded massive profits. In 2021, Nutrien’s gross manufacturing profit margin was up 669% from 2020, though its costs of goods sold had increased only by 58%. In 2022, Nutrien, CF Industries, and Mosaic improved upon their 2021 profits by 142%, 212 % and 120%, respectively. Though manufacturers cited increased energy costs, economists at Iowa State University found that only 15-19% of the price spike in 2021-22 was attributable to increases in natural gas prices. The researchers could not say definitively whether companies were inflating prices, and the Department of Justice has opened an investigation on these issues.

California has no manufacturers of raw nitrogen, phosphorus, or potassium. The inputs in fertilizers that growers buy from California retailers are largely sourced from these major national and international suppliers, making the state’s producers vulnerable to national and global markets. 

How are California growers responding? 

According to interviews and correspondence with five specialty crop growers, five extension agents, and a few other agricultural experts, prices are straining California farmers. Across the board, growers seem to be focusing on efficiency. “Growers are reducing their inputs and reducing units applied,” says Brandon Rebiero, one almond grower interviewed. This is particularly consequential for almonds, since reductions in fertilizer application in one year can impact yield for years to come. “People are optimizing water,” adds Rebiero. “If you can’t put on the full amount of fertilizer you need, you at least get your water right to drive yield and make sure you’re not leaching what you do apply.” 

Some growers are more unwilling to reduce their inputs due to unfavorable impacts on yield. “[Strawberry] growers are generally reluctant to reduce nitrogen inputs or change sources due to cost concerns,” says Andre Biscaro, a University of California Agriculture and Natural Resources (UC ANR) Advisor. He emphasizes that fertilizer costs comprise a very small percentage of production costs for strawberries –  0.8%, compared to 9% for almonds and 23% for Midwest corn. Richard Smith, Emeritus Farm Advisor with University of California Cooperative Extension (UCCE), describes the same mindset among lettuce growers. The risk of under-applying nitrogen is, he says, “enormous.” Fertilizer comprises less than 3% of lettuce growers’ operating budget. 

But advisors agree that if prices continue to rise, growers could be forced to change their approach. And some already are. 

What alternatives are there to synthetic fertilizers?

One almond grower, who has both conventional and organic operations, is applying compost to his conventional operations in lieu of some of his synthetic fertilizer. Compost made from cow or chicken manure is particularly nutrient rich. “We started incorporating poultry manure applications because we found that our soil health was much better with the organic inputs,” says a Central Valley tomato grower. “We had been trying to increase phosphate for years with commercial fertilizers and really couldn’t move the needle…poultry manure has worked out great, so we really don’t buy commercial phosphate anymore.”

California is already producing massive quantities of manure from its dairy industry. San Joaquin Valley dairies produce 178,000 tons of plant-available nitrogen per year, according to Sustainable Conservation. Most of this surplus could be applied to cropland within 5-10 miles of dairy operations. By ton, it could theoretically replace 13% of the synthetic nitrogen applied to California farms, as estimated using the California Department of Food and Agriculture (CDFA)’s fertilizer tonnage report. Though using compost raises additional logistical considerations, many growers already use it and are eager to use more. “All growers would use compost if they could afford it,” says one almond grower.  

But scaling manure-based compost is complicated by environmental regulations. Brian Shobe, Policy Director at the California Climate and Agriculture Network (CalCAN) explains,“If [a dairy] starts selling compost and sells above a certain volume, it can move into a higher regulatory tier, bringing additional requirements, reporting, and compliance costs.” Dairies, he says, have been more hesitant to sell large volumes of compost as a result. “So there needs to be some work on that set of regulations,” says Shobe. 

Dr. Vivian Wauters, Agroecology Project Scientist at UC ANR, adds that expanding community composting operations might offer a decentralized solution, since relying on manure from large dairy operations may pose a transportation challenge. 

There are other fertilizer alternatives beyond compost, which can be used alongside synthetics or, potentially, in lieu of them. These include biological amendments containing microalgae, nitrogen-fixing microbes, and mustard plant extracts. One producer of an algae-based fertilizer reported increased farmer interest in their products since the price shocks. And according to CC Ciarolo, Partner Engagement Manager at CalCAN, some small-scale nut growers are using strategies like cover cropping with nitrogen-fixing crops, mulching, and integrating livestock into their orchards, all of which can help reduce inputs of synthetic nitrogen. 

How can alternatives be scaled? 

What support do other growers need to consider adopting practices like these? 

“Proof of concept,” says Rebiero. “Does this actually work? If I go through the hurdles of compost application, does it work? If I plant the cover crop, will it actually give me nitrogen?”

His advice for researchers is to “Always dollarize it. “ He says, “Where I see research get stuck is when they prove something works but forget to convert it to the grower’s budget.”

Rebiero applies a product containing soil microbes to his orchards, which he says has increased the efficiency of his compost applications. But given the range of products on the market, he says more research is needed to determine which ones actually work. “Growers can’t afford to experiment with limited budgets.”

And budgets are, at the end of the day, the limiting factor. “Economic incentives would help,” says Rebiero. California provides some incentives for growers to use compost, cover crops, and other soil health practices through the Healthy Soils Program. Growers are complimentary of the program and hope funding continues after limited Prop 4 funding runs out. “It injects money into the compost industry and allows growers to solve their own bottlenecks,” comments another almond grower. 

Other supporting initiatives are underway. Equipment sharing programs allow growers to rent equipment like compost-spreaders they otherwise couldn’t afford. Other initiatives – through the State and otherwise – are focusing on the regenerative transition more broadly. A Ventura County initiative led by Patagonia and the Rodale institute is currently piloting a program to transition specialty crop growers in the region to regenerative systems. From their first pilot year, they have 10,000 acres in transition.

Whether as the primary goal or as a co-benefit, all of these initiatives could reduce farmer reliance on a vulnerable fertilizer supply chain dominated by a handful of companies. And farmers need options, because fertilizer prices are unlikely to fall anytime soon. Even if and when tensions ease in the Strait of Hormuz, it could take years for fertilizer prices to fully recover.

For more on the fertilizer industry and fertilizer price issues, read the full report.