THESE days cheap biomass is hard to find. The last decade has seen a shift in crude oil prices to a new base price, the slowdown of the U.S. wood products industries, and an interest in energy security through bioenergy production. The result is residual biomass is becoming scarce. In one sense, we are running out of wastes! Undervalued organics are becoming too valuable to throw away. As competition increases for organic waste feedstocks, the value of these materials will also rise.
A benefit of this shift in biomass value is a strong and growing interest in organic nutrients. This translates into higher prices for organic sources of nitrogen and phosphorus. In 2011, I worked with both composters and anaerobic digester developers to better understand the changing environment for organic nutrients. Both of these value-adding technologies rely on increased nutrient values to move product.
One of the interesting sources of data is the Economic Census, Annual Survey of Manufacturers, Sector 31. The total value of shipments for fertilizer product classes shows that both nitrogen and phosphoric fertilizer product classes decreased in 2009, which is the most recent year available. The total value here includes the (higher) prices times the (lower) quantities. The universe of nitrogen fertilizer manufacturing had a value of $7.8 billion in 2009. This includes all subsectors of nitrogen fertilizer manufacturing, including organic forms of nitrogen. Due to the recession, the value of nitrogen fertilizer manufacturing overall decreased by $1.5 billion (16.2 percent) from the higher value of $9.3 billion in 2008. Similarly the value of the phosphatic fertilizer manufacturing sector in 2008 was $10.6 billion and decreased by 22 percent to a value of $8.3 billion dollars in 2009. The tight economy caused commercial fertilizer users to reduce the quantities of higher priced conventional fertilizers purchased.

Fertilizers of Organic Origin

The value of the nitrogen fertilizer subsector of fertilizer materials of organic origin, however, defied the economic downturn and increased by 45 percent from 2008 to 2009. Organically-derived fertilizers had a value of $560 million in 2009, up from the 2008 value of $380 million. This is a large increase without a recession, but the strength of the demand for these products is emphasized by the double-digit decreases in value of the other petroleum-based nitrogenous and phosphatic fertilizers.
Going back to 2002, the subsector of fertilizer manufacturing that focused on fertilizer materials of organic origin has increased steadily in value. In 2002, this subsector had a value of $87 million, or 16 percent of the 2009 value. For four of the last five years the annual increase in value of this organic nutrient subsector has been over 40 percent. Unlike the lack of money to spend for the rest of the U.S. economy, there has been no hesitation in spending additional resources on these materials during the economic downturn.
There are several reasons for this phenomenon. First, demand for organic food is increasing. More people see organic food as a priority for themselves and their families. The second reason organic fertilizer prices were unaffected by the recession is that consumers of organic food are likely less flexible in their food purchasing choices. Organic food consumers place a premium on food choice and already choose to spend more of their disposable dollars on food purchases.
The strength of increasing demand for organic food production in the U.S. can be seen in the increased organic crop production acreage. If you are paying attention, I am using a supply measure as a proxy for economic demand. USDA’s Economic Research Service (ERS) indicates that U.S. organic crop production has increased steadily from 1 million acres in 1995 to 5 million acres in 2008. The USDA’s ERS dataset is not continuous for the reported time period, but it is clear that reported organic crop production acres in the U.S. has increased 5 fold in the last 13 years. This acreage is still less than 1 percent of total U.S. cropland, but it is also acreage that will not be used to produce bioenergy crops. The organic crop production acreage has been increasing even as corn and soybean acres have been increasing for the added energy crop market demands.

All Fertilizer Prices Increasing

Another reason for such a minor effect on organic nutrients from the economic recession is that conventional fertilizer prices also are increasing. In this case, the quantities purchased decreased by more than the increases in prices, causing the total value of the fertilizer industry reported earlier to decrease in 2009. Around the world, nations with traditionally starch-based diets are looking for diets containing more meat protein. There is a new realization that the world needs more human food and livestock feed. Therefore, growing demand for greater quantities of crops means a greater demand for fertilizer.
Conventional U.S. fertilizer prices across nitrogen, phosphorus and potassium products have been increasing for the last 10 years, due in part to demand for more human food and livestock feed. A second trend is the disconnecting of fertilizer prices and natural gas prices. Since nitrogen fertilizers are derived largely from natural gas, it made for easy math to plan fertilizer prices based on natural gas prices. That is no longer true. Natural gas prices have not increased, while fertilizer prices across nutrients continue to grow.
These increasing prices are good economic news for producers of organic nutrients, such as compost and anaerobic digester operators. While increased competition for organic and biomass feedstocks grows, causing higher input prices, increased nutrient prices for organically-derived nutrients holds potential to overshadow the input cost of feedstocks. I wish you all higher fertilizer revenues in 2012!

Mark Jenner, PhD; California Biomass Collaborative, World Agricultural Economic and Environmental Services (WAEES) and Biomass Rules, LLC (www.biomassrules.com).