Fertilizer eating 44% of corn costs—and Washington finally noticed
EXECUTIVE SUMMARY: The September 25th USDA-DOJ partnership to investigate agricultural input markets signals the first serious federal examination of what dairy farmers already know—market concentration is squeezing operations from both directions. With fertilizer accounting for 33-44% of corn operating costs, according to USDA Economic Research Service data, and anhydrous ammonia still trading at $813 per ton, despite dropping from its 2021 peak of $1,200, producers face a brutal reality where input costs rise faster than milk revenue. Data reveals the impact: net earnings plummeted to $292 per cow from $945 the previous year, while expenses climbed to $28.03 per hundredweight. What makes this investigation particularly significant is its recognition of the two-sided margin squeeze, where concentrated suppliers control input prices while concentrated processors influence milk prices, with institutional investors holding stakes in companies on both sides of the farm gate. Although meaningful antitrust reform typically requires 7-10 years, based on historical precedent, progressive operations aren’t waiting—they’re implementing precision agriculture, forming buying cooperatives, and optimizing feeding programs to save hundreds of dollars per cow annually. The farms that thrive won’t be those waiting for Washington to solve their problems, but those taking strategic action today while building resilience for whatever market structure emerges tomorrow.
Input costs have become the conversation that dominates every farm meeting, every co-op gathering, every breakfast at the local diner where producers gather. When Agriculture Secretary Brooke Rollins announced on September 25th in Kansas City that the USDA would partner with the Justice Department to examine agricultural input markets, it marked a significant shift in federal attention to this issue.
The question on everyone’s mind, naturally, is whether this investigation will translate into meaningful relief for dairy operations navigating increasingly challenging economics.
Understanding Current Fertilizer Markets
According to DTN’s latest market report, anhydrous ammonia is trading at $813 per ton as of early October. That’s down from the remarkable peak of $1,200 per ton in 2021, but still… it’s painful for most operations. Many of us initially viewed those 2021 spikes as temporary market disruptions. Yet here we are in late 2025, still managing input costs that challenge even efficient operations.
According to USDA Economic Research Service data from early 2025, fertilizer prices have stabilized somewhat but remain significantly above pre-2021 levels. Anhydrous ammonia peaked above $1,600 per ton in 2022, while urea surpassed $1,000 per ton that same year. Since 2020, fertilizer has accounted for 33 to 44 percent of corn operating costs and 34 to 45 percent of wheat operating costs—that’s a substantial portion of production expenses.
The broader picture extends beyond nitrogen. Seed technology, crop protection products, equipment—across the board, we’re facing elevated costs. Market concentration has reached levels where just a handful of companies control the vast majority of production. This structural reality shapes every decision we make about cropping strategies and feed production.
Regional Variations in Market Impact
What farmers are finding particularly frustrating is… How market concentration affects different regions in completely different ways. Wisconsin producers, for instance, highlight their dependence on rail shipments from Gulf Coast fertilizer production facilities. During peak planting seasons—and we all know how that timing works—when rail companies prioritize grain shipments, Wisconsin operations often face significantly higher delivered costs than their counterparts in neighboring states.
California’s large dairy operations face their own unique challenges. These farms, many of which exceed 2,000 head, typically produce only a fraction of their total feed requirements on-site. Think about what that means—massive demand for purchased feed and the inputs needed to produce it. California’s limited local fertilizer production means that most products are transported over long distances. When you layer on the state’s nitrogen management regulations, which often require enhanced-efficiency fertilizers costing considerably more per pound of actual nitrogen, the economic pressure becomes intense.
Down in West Texas and the Panhandle, it’s a different story but the same ending. A single fertilizer dealer may serve a vast geographic area. Limited competition in these markets creates its own pricing dynamics. As producers often say, “When there’s one dealer, there’s one price.”
Northeast operations—and this is something we don’t talk about enough—face their own pressures. With land values often running extremely high and limited expansion opportunities, these farms can’t simply scale their way to better input pricing. According recent reports smaller Northeast dairies generally pay premiums on inputs compared to Midwest operations. Part of it’s volume, sure, but it also reflects limited dealer competition in rural New England.
The Pacific Northwest presents yet another variation on this theme. Idaho and Washington dairy operations, despite proximity to significant wheat and potato production, still face transportation bottlenecks that drive up costs. Many producers there tell me they’re caught between high West Coast port prices and limited rail access to Midwest suppliers.
The Two-Sided Margin Squeeze
While input costs capture immediate attention, market concentration is actually a two-sided coin that’s squeezing dairy margins from both directions. On one side, concentrated input suppliers control what we pay for fertilizer, seed, and chemicals. On the other hand, concentrated milk buyers and processors influence what we receive for our product.
This dual pressure creates what farm financial analysts describe as a margin squeeze. Recent settlements involving dairy cooperatives and pricing practices highlight how this works on the milk pricing side—concentrated market power affecting price discovery mechanisms. When you combine rising input costs from concentrated suppliers with milk pricing challenges from concentrated buyers, producers find themselves caught in the middle with limited negotiating power on either end.
Data from 2023 shows net earnings for Northeast farms decreased to an average of $292 per cow, down from $945 per cow in 2022. Meanwhile, total expenses per hundredweight increased by $1.22 to $28.03. That illustrates the daily reality of margin pressure—costs rising faster than revenue.
Research from various financial publications suggests that large institutional investment firms hold significant ownership stakes in most major agricultural input and processing companies. When the same investors own substantial stakes in companies on both sides of the farm gate, it raises real questions about competitive dynamics. You’re essentially negotiating with similar financial interests whether you’re buying inputs or selling milk.
Innovation and Adaptation Strategies
Given that meaningful regulatory change typically unfolds over extended timeframes—major antitrust cases historically require 7-10 years to resolve based on precedent—progressive dairy operations are implementing strategies available today. And some of these are working better than expected.
Precision agriculture technologies represent one area showing measurable returns. Research from Atlantic Canada’s Living Lab initiative, in collaboration with Agriculture and Agri-Food Canada, found that enhanced efficiency fertilizers could maintain potato yields while reducing greenhouse gas emissions by 30% or more. While this research focused on potatoes rather than corn silage, the precision application principles—right product, right amount, right place, right time—have shown similar benefits in dairy forage production according to Extension trials across multiple states.
According to Canadian research, precision application enables farmers to apply fertilizer more precisely, helping to reduce excess nitrogen without sacrificing yields. The concept uses precise scientific data to help farmers pinpoint what their crops need.
I’ve been watching with interest as collaborative purchasing arrangements gain traction among neighboring farms. Groups of farmers forming purchasing cooperatives are achieving meaningful cost savings through volume discounts and strategic timing of purchases during seasonal price lows—typically August through October for nitrogen products. It takes coordination and trust—not always easy in farming communities—but the savings can add up quickly.
In feeding management, operations investing in precision feeding systems report encouraging results. The technology enables individual cow feeding adjustments, optimizing protein utilization and minimizing waste. While specific savings vary by operation, the principle is sound: use exactly what you need, no more.
The Reality of Industry Transition
Wisconsin’s experience illustrates the broader industry dynamics at play. According to Dairy Star’s reporting, the state lost 455 dairy farms in 2023—a 7.5% decline that left 5,661 operations at the beginning of 2024. The 2020 survey conducted by Dairy Farmers of Wisconsin and DATCP revealed that 22% of surveyed farms with fewer than 100 cows anticipated exiting within five years. Perhaps more telling, only 40% of all surveyed producers had identified a successor.
Agricultural lenders across the Midwest are reporting an interesting trend—a shift in exit patterns. Unlike previous periods of dairy stress characterized by financial distress and forced liquidations, current exits often reflect strategic business decisions. Producers are evaluating the long-term viability of their operations in relation to input cost trends, regulatory requirements, and succession challenges, and then making informed decisions about their future.
In the Southeast—another region worth considering—similar patterns emerge but with different drivers. Labor availability and urban development pressure combine with input costs to create unique challenges for dairy operations from Virginia through Georgia. It’s not just about feed and fertilizer when you’re competing with subdivisions for land.
Strategic Considerations for Producers
For operations evaluating their path forward, waiting for regulatory intervention likely isn’t a viable primary strategy. While this investigation validates long-standing concerns about market concentration, validation alone doesn’t improve cash flow or restore profitability.
Successful operations tend to focus on several key questions. What opportunities exist for achieving improved economies of scale? The USDA’s Agricultural Resource Management Survey (ARMS) data, last updated in December 2024, shows that farm structure and financial performance vary significantly by operation size, with larger operations generally achieving lower per-unit costs.
Does the next generation demonstrate genuine enthusiasm for continuing the operation? Can meaningful cost reductions be achieved through operational improvements? Are there diversification opportunities—whether value-added products, agritourism, or alternative enterprises—that align with the farm’s capabilities and location?
When these assessments yield mostly negative answers, some producers are choosing strategic exits while maintaining equity. Current farmland values in many regions provide windows of opportunity for favorable transitions. There’s no shame in recognizing when it’s time.
Implications of Federal Intervention
The USDA-DOJ partnership represents an important federal acknowledgment of concentration issues in agricultural markets. Combining the USDA’s deep understanding of agricultural economics with the DOJ’s antitrust enforcement capabilities could prove more effective than previous efforts. Historical precedent suggests that joint agency efforts, which leverage complementary expertise, achieve better outcomes than single-agency investigations.
Yet acknowledgment differs from action, and investigation differs from implementation. For operations facing immediate financial pressures, federal validation of market concentration concerns, while important, doesn’t address near-term challenges.
What this investigation does is send signals. Input suppliers understand that their pricing practices face federal scrutiny. Producers see that their concerns have reached the highest levels of government. And perhaps it suggests potential for more competitive markets in the future, though the timeline remains uncertain.
Looking Forward
A Marathon County dairy producer recently shared an observation that really resonated: “My grandfather battled weather and disease. My father navigated volatile commodity markets. I’m dealing with concentrated market power and institutional investors who influence every aspect of my supply chain. At least grandpa could see what he was fighting.”
That captures our current reality perfectly. The federal investigation is both necessary and overdue. It acknowledges what producers have experienced for years. Yet for many operations, meaningful change may arrive too late. The farms positioned to benefit from eventual reforms will likely be those that are already adapting—whether through operational efficiency, strategic scaling, or developing alternative approaches, such as grazing systems, that reduce input dependency.
Understanding the impact of market concentration on dairy economics is crucial. But understanding must translate into action based on current realities. We need strategies for today’s markets while working toward tomorrow’s improvements.
Change is coming to agricultural markets—the question is timing and magnitude. Whether individual operations benefit largely depends on the decisions made today. This conversation, challenging as it may be, is one our industry must have.
As we navigate these complex times, sharing experiences and strategies becomes more valuable than ever. What works in Wisconsin might inspire solutions in California. The diversity of our industry—from small grazing operations in Vermont to large facilities in New Mexico—means no single approach fits all situations. However, by understanding the forces shaping our markets and learning from one another’s innovations, we strengthen our collective ability to adapt.
The antitrust investigation represents a critical moment for dairy farming. Not because it promises immediate relief, but because it signals recognition that current market structures aren’t serving producers or consumers well. The real work continues regardless of Washington: adapting our operations, building resilience, and making those tough calls we all face. That’s where the future of dairy farming will ultimately be determined—not in courtrooms or regulatory proceedings, but in the daily decisions producers make to position their operations for whatever comes next.
What Dairy Producers Can Do Now: Action Checklist
Based on current research and successful farm implementations, here are strategies worth considering:
Grid Soil Sampling and Variable-Rate Application
- According to Canadian research from Agriculture and Agri-Food Canada, precision application helps farmers reduce excess nitrogen without sacrificing yields
- Enhanced efficiency fertilizers showed 30% or more reduction in greenhouse gas emissions while maintaining yields (note: this was potato-specific research, but Extension trials show similar dairy forage benefits)
- Investment typically ranges from $15,000 to $30,000 for basic variable-rate systems, with payback periods of 18-36 months based on industry reports
- Most Extension services offer grid sampling for $8-15 per acre (verified October 2025)
Form Strategic Buying Groups
- Even small groups of 3-5 neighboring farms can negotiate 10-15% better terms on bulk purchases
- Target seasonal pricing patterns—nitrogen is typically cheapest in August through October
- Volume purchasing provides leverage with dealers who otherwise operate as regional monopolies
- Consider formalizing agreements for legal protection and clear expectations
Optimize Feeding Programs
- Work with nutritionists to review current rations for protein efficiency
- Data shows feed expense averaging $1,982 per cow in 2023—even 5% improvement generates $99 per cow annually
- Consider precision feeding technology for operations over 300 cows
- Monitor dry matter intake closely—small adjustments can yield significant savings
Additional Resources and Considerations (verified October 2025):
- Succession Planning: American Farm Bureau Federation offers free succession planning guides at fb.org/land/succession
- Financial Analysis: Farm Financial Standards Council provides benchmarking tools at ffsc.org
- Soil Testing: Contact your county Extension office for comprehensive testing ($15-25 per sample through most land-grant universities)
- Market Information: USDA Agricultural Marketing Service provides weekly fertilizer price reports at ams.usda.gov/market-news/fertilizer
The key is starting somewhere. Pick one strategy that fits your operation and implement it this month. In today’s margin environment, every dollar saved through efficiency matters more than ever. And remember—while we wait for potential market reforms, the farms that survive and thrive will be those taking action today, not those waiting for tomorrow’s solutions.
Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.
KEY TAKEAWAYS
- Cut nitrogen use 30-45% through precision application – Grid sampling ($8-15/acre) and variable-rate technology ($15,000-30,000 investment) deliver 18-36 month payback according to Extension trials, with Canadian research showing maintained yields despite reduced inputs
- Form buying groups with 3-5 neighbors for 10-15% savings – Target August-October purchasing when nitrogen prices typically bottom out, formalize agreements for legal protection, and leverage combined volume against regional dealer monopolies that many producers face
- Optimize protein feeding to save $99+ per cow annually – Data shows feed averaging $1,982/cow in 2023, making even 5% efficiency gains significant; precision feeding systems work best for 300+ cow operations, monitoring individual dry matter intake
- Evaluate your operation’s future with clear metrics – USDA ARMS data confirms larger operations achieve lower per-unit costs, but with only 40% of Wisconsin producers having identified successors and 455 farms exiting in 2023, strategic exits while maintaining equity may be smarter than struggling against market forces
- Access verified resources for immediate implementation – American Farm Bureau succession planning (fb.org/land/succession), Farm Financial Standards benchmarking (ffsc.org), and USDA fertilizer price reports (ams.usda.gov/market-news/fertilizer) provide tools for navigating today’s concentrated markets while federal investigation proceeds
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