Material Insights · Understanding the Material World

Maize and Urea

Maize is one of the three cereals that together take about half of the world's nitrogen fertiliser, and urea is the main form in which that nitrogen is bought. Fertiliser is a third or more of US maize operating costs, so the urea to maize price ratio shapes how much farmers apply and, over a season, feeds back into urea demand.

Maize (commodity) and Urea (chemical): 4 relationships.

How they are linked

1. Main nitrogen source

Physical flow · Strong · Urea to maize

Maize yields respond strongly to nitrogen, and urea is the cheapest and most widely traded solid nitrogen fertiliser, so a large part of the nitrogen put on maize fields arrives as urea.

  • 15 to 18% of world nitrogen fertiliser use, each for wheat, rice and maize, 2010/11
  • 57% urea share of global nitrogen fertiliser use, 2013/14

Wheat, rice and maize each took a similar share of world nitrogen use in 2010/11, so maize alone is a major outlet for urea. The urea share of nitrogen use had risen from 49% in 2000/01 to 57% in 2013/14. In the US, the largest maize grower, much nitrogen is also applied as anhydrous ammonia, so the urea link is tighter in Asia, Latin America and Africa than in the US Corn Belt.

Sources: International Fertilizer Association; farmdoc daily, University of Illinois

2. Price link: input cost

Cost and price · Medium · Both ways, over seasons

High grain prices make extra nitrogen pay and raise fertiliser demand, while high fertiliser prices squeeze maize margins and planting choices, so the two prices meet over a season rather than month by month.

  • 0.06 monthly change correlation
  • 0.60 12-month change correlation
  • 0.52 fitted elasticity

Monthly moves are almost unrelated, because urea also responds to gas costs and trade policy. Over a year the link is clear: in 2021 to 2022 high grain prices and high fertiliser prices arrived together. The site's series show a lag of about one month between the two.

Sources: Material Insights (World Bank, FRED, IMF data)

3. Cost share and affordability

Cost and price · Strong · Urea price shapes maize costs and application rates

Fertiliser is one of the biggest operating costs of growing maize, and the economically best nitrogen rate depends on the ratio of the nitrogen price to the grain price, so dearer urea means both higher costs and lower application.

  • 33 to 44% fertiliser share of US corn operating costs, 2010 to 2019
  • 244 and 207 lb anhydrous ammonia per acre at the best-return rate, with ammonia at USD 500 and USD 1,100 a ton, central Illinois, 2021

University of Illinois analysis in 2021 showed that a rise in ammonia from USD 800 to USD 1,100 a ton added about USD 25 an acre, offset by a rise of only about USD 0.11 a bushel in the corn price at a 220 bushel yield, and advised cutting rates by at least about 20 pounds of nitrogen per acre. Where governments fix farm-gate fertiliser prices, as India does for urea, this rationing signal is muted.

Sources: USDA Economic Research Service; farmdoc daily, University of Illinois

4. Ethanol pull in India

Transition · Rising · More maize area raises urea demand

India's ethanol blending programme has turned maize into a fuel feedstock, which pulls more land and inputs into the crop and adds to nitrogen demand.

  • about 37.7 Mt India maize output, 2023-24 (final estimate)
  • about 3.5 Mt maize used for ethanol in India, 2024, about four times the year before

India's average maize yield is about 3.5 tonnes a hectare, against a world average of about 6 tonnes (2024), so meeting ethanol demand needs both more area and higher yields, and both need more nitrogen, much of it as subsidised urea. In 2024 the ethanol pull turned India, until then Asia's top maize exporter, into a net importer for the first time in decades.

Sources: ChiniMandi (reporting Ministry of Agriculture and Farmers Welfare estimates); Business Standard; Hydrocarbon Processing

For investors

Key learnings

  1. Maize is a large and price-sensitive outlet for urea: when the urea to maize price ratio is high, farmers outside fixed-price markets cut rates and urea demand softens.
  2. Fertiliser was 33 to 44% of US maize operating costs in 2010 to 2019, so urea spikes hit grower margins and input distributors before they show up in grain prices.
  3. The yearly link between the two prices is much stronger than the monthly one, so seasonal positioning matters more than short-term trading on either.

What to track

  • Urea price divided by maize price: A high ratio signals lower application and weaker urea demand in open markets (Monthly · World Bank Pink Sheet)
  • US corn planted area and nitrogen rate guidance: More area or higher recommended rates lift spring nitrogen demand (Annual, March and June · USDA NASS, university extension)
  • Indian kharif and rabi maize sowing area: Faster area growth raises subsidised urea offtake (Weekly in season · Ministry of Agriculture)

For policymakers

Key learnings

  1. India's fixed urea price removes the signal that makes farmers elsewhere cut nitrogen when urea is dear, so the subsidy bill absorbs world price shocks.
  2. The ethanol push makes maize a growing claim on urea, linking fuel policy to fertiliser imports and subsidy costs.
  3. India's maize yields, about 3.5 tonnes a hectare in 2024, are well below the world average of about 6, so better nitrogen management could lift output without a matching rise in urea use.

What to track

  • Urea sales by state against maize area: Shows whether maize expansion is driving urea offtake (Monthly · Department of Fertilizers)
  • Maize allocated to ethanol distilleries: Rising volumes raise maize area and nitrogen demand (Per ethanol supply year · Ministry of Petroleum, OMC tenders)
  • Urea imports and fertiliser subsidy outgo: Higher imports mean world urea prices reach the budget (Monthly · Department of Fertilizers)

India

India grew about 37.7 Mt of maize in 2023-24 and is expanding the crop for ethanol, while urea reaches farmers at a fixed subsidised price. Extra maize area therefore adds mainly to urea imports and the subsidy bill rather than to farm costs.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Global nitrogen fertiliser demand and supply: trend, current level and outlook, International Fertilizer Association (2016)
  3. Fertilizer a major expense in U.S. corn production (Chart of Note), USDA Economic Research Service
  4. Management decisions relative to high nitrogen fertilizer prices, farmdoc daily, University of Illinois (2021)
  5. Agriculture ministry releases final estimates of sugarcane, maize and other crops for 2023-24, ChiniMandi (reporting Ministry of Agriculture and Farmers Welfare estimates) (2024)
  6. Can maize maintain its newfound supremacy in ethanol production?, Business Standard (2024)
  7. Ethanol push turns India into corn importer, shaking up global market, Hydrocarbon Processing (2024)