Future of The Illinois Fertilizer Industry Myths, Realities, and Perception

Illinois Fertilizer Conference Proceedings
January 28-30, 1991

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Future of The Illinois Fertilizer Industry Myths, Realities, and Perception

R.G. Hoeft¹

A LOOK BACK TO LOOK AHEAD

While history is not always a good predicator of the future, it can provide an indication of what might occur in years to come.

Growth rates achieved by the fertilizer industry over the last few decades have been phenomenal (Fig. 1). Starting from a rather meager base, N use has increased over 240fold in the last four decades. Phosphorus, which was used more routinely in the 1940s, has increased nearly 18-fold and potassium, over 35-fold in the same time period. Most of these increases occurred in the 1960s and 1970s. During the latter part of the 1980s, fertilizer consumption decreased.

When one looks closely at the data, it is evident how closely consumption is tied to crop acreage (Fig. 1). A small dip in both acreage and fertilizer consumption occurred in 1978, followed by a large decrease in 1983, the PIK (Payment in Kind) year. The set aside programs of the late 1980s also resulted in decreases in acreage and consequently fertilizer consumption. Trends in the 1980s demonstrate the vulnerability of the fertilizer industry to government farm programs. Current emphasis on budgetary constraints probably means few additional acreage reduction programs, but the ability of the American farmer to produce more food and fiber than the market will support probably means continuation of present acreage reduction programs. With stable crop acreage (both total and proportion in each of the major crops) changes in fertilizer consumption will be tied to increases in crop yield. Without any major technical breakthrough, those increases will be limited to something less than 1 percent per year for the major crops.

Environmental programs will impact fertilizer use in the future. The magnitude of that effect is yet to be determined, but it likely will not bode well for the industry in some geographic areas. The Environmental Protection Agency is planning to launch a nitrogen management program in response to the recent well water survey results that indicated that nitrates were present at levels above the public health standard of 10 ppm nitrate-N in 2.4 percent of rural and 1.2 percent of community wells sampled. That plan will likely be targeted toward N Application in vulnerable areas, primarily the sands and shallow soils. Time of application, not necessarily rate, should be a key factor in the plan. However, in those cases where excessive rates are being applied to compensate for expected loss, adjustments will need to be made.

Prior to 1970, more N was removed in the harvested portion of non-legume crops than was applied as fertilizer (Fig. 2). Since then, non-legume crops have removed 70 to 75 percent of the amount applied, except in years of poor crop production (Fig. 3). Research has shown that the efficiency of N use at the rate of N necessary for optimum production is approximately 60-70 percent. Therefore, in years of normal production, application is close to that needed for efficient production.

Some of the N not used by crops may find its way into surface or groundwater supplies, thus becoming a potential environmental contaminant. However, on most Illinois soils the excess N will most likely be lost by denitrification, immobilized by crop residues, or used by succeeding crops including legumes.

Since nitrogen availability is biologically influenced, a simple input-output balance using non-legume grain crops does not adequately portray the situation. Research has shown that approximately 47 percent of the N used by soybeans is derived from soil N. Since nearly all of the soybeans or soybean products are exported from Illinois, and since soybean and corn acreage are about equal each year, the equivalent of 25 percent of the amount of N applied as fertilizer is exported from Illinois in the soybean crop. If one includes the non-symbiotic soybean N in crop removal, crops remove nearly 100 percent of applied N in normal years (Fig.4). From 1970 through 1988, non-legume crops removed about 5 million tons of N less than applied. When one includes 47 percent of the N in soybeans along with crop removal by non-legumes, the excess N application in the same time period decreases to 700,000 tons.

The Illinois livestock industry consumes about one-half of the corn and all of the non-legume hay. A portion of the N contained in the feed will be returned as manure for succeeding crops. If one assumes that 25 percent of the feed N is returned to the land in an available form and subtracts that from crop removal (non-legume plus 47 percent soybean N), then harvest of fertilizer N is reduced to about 90 percent in normal years (Fig. 5). Regardless of the assumptions made, it is evident that fertilizer N use in Illinois is more than adequate at present crop production levels.

Phosphorus consumption increased markedly in the 1960s and remained stable at just under 500,000 tons until the late 1980s when it decreased to about 400,000 tons per year. Prior to 1960, phosphorus removal by crops exceeded fertilizer application, but from 1970 to 1988 application exceeded removal by an accumulated total of 560,000 ton of P₂0₅ (Fig. 6). If one assumes that one-half of the corn grain and all of the alfalfa and grass hay are consumed by livestock and that one-fourth of the P in those crops are returned to the land, phosphorus application in the same time period exceeded removal by approximately 1.4 million tons. Since many soils have now attained the desired soil test level, it is doubtful if fertilizer usage rates will increase.

The increase in potassium consumption tended to be somewhat slower than for phosphorus. It peaked at 800,000 ton in the early 1980s and then decreased at the end of the 1980s to just under 700,000 tons per year. Prior to 1970, K removal by crops was significantly greater than that applied in fertilizer (Fig. 7). However, since that time K applications have exceeded crop removal by a total of more than 3.5 million tons. If one assumes that half of the corn and all of the alfalfa and grass hay are consumed by livestock and that one-fourth of the K in those crops is recovered and applied to the land then this excess is about 1 million ton larger, or more than 4.5 million ton. Like phosphorus and nitrogen, total K consumption in Illinois will probably not increase in the foreseeable future.

From a materials standpoint, there is little reason to suspect major shifts in relative use of either of the two major nitrogen sources (Fig. 8) or in the mix between dry and liquid materials (Fig. 9), unless stringent safety restrictions are placed on ammonia use. The most significant changes will occur with advances in application equipment that provide a mechanism to fine-tune application rates to the specific needs within a given field and perhaps for the product of choice.

THE FERTILIZER INDUSTRY OF THE FUTURE

From a supply standpoint, the fertilizer industry has matured to the point where growth in sales will be limited to growth from changes in cropping patterns and yields. This means that it is time for the industry to move into a service-oriented mode that fine-tunes fertilizer recommendations to the specific field or areas within the field. These recommendations must take into account both economical and environmental impacts.

To successfully make the transition to a more service-oriented industry, the services must be looked upon as an important component of the fertilizer business and as an essential service for the customer, not as a mechanism to attract commodity sales as was done in the past. Free or subsidized services were often inadequate to meet farmers needs. In fact, poor jobs of soil sampling associated with free testing services created a lack of trust in soil test results and recommendations: Because of past experiences, extra effort must be put forth to convince customers that new service-oriented programs are reliable and cost effective. All services must be based on scientific facts. To remain viable, dealerships must charge enough to obtain a reasonable profit from the service portion of the business.