Those Fertilizer Prices Will Kill You !

Not everyone's complaining about the skyrocketing price of food.

Manufacturers of potash, phosphate and other plant additives have seen demand for their products soar. Tight supply has pushed up prices.

The Wall Street Journal reports fertilizer costs have jumped more than any other agricultural input, up 63% from a year ago compared to a 43% increase for fuel and 30% for seeds. Potash -- a rock that's ground up and used to strengthen plants -- has soared from $230 to over $700 per ton. Phosphate prices are also up more than threefold.

The push for alternative fuels has squeezed acreage, as farmers replace fallow ground and less profitable crops with corn or palm oil trees. Although this pop in demand is partly to blame for higher fertilizer prices, industry experts cite supply constraints as the chief culprit. Decades of weak commodity prices forced manufacturers to ratchet down production capabilities. Now, the structural shift in demand has caught fertilizer producers off guard. Supply-demand dynamics, along with pricing power, has sent prices soaring.

In response, farmers are scrambling to control margins. As feed and other input prices rise, they charge more for meat, chicken and eggs. Food price inflation is amplified, as supplies aren't rising to meet new demand from developing countries.

Irrespective of commodity market gyrations, demand for crop additives remains high. A recent New York Times article cited the availability of chemical fertilizers as one of the primary reasons much of the developing world has turned the tide against chronic malnutrition. As costs outstrip poor farmers' ability to pay for the additives that increase yields, those advances are threatened. Manufacturers around the world are racing to increase production capabilities, but new plants won't come on line for years.

Investors and academics continue the debate over whether commodity prices are operating in a bubble. Speculators, many of whom are large enough to move markets on their own, are contributing to the spike in prices. Meanwhile, consumers in both the developed and developing world face higher prices for what they need most: food and fuel.