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DOJ investigation sought for fertilizer price hikes

iStock Fertilizer anyhydrous tanks iStock 465393520.jpg
FERTILIZER COMPANIES UNDER SCRUTINY: Farmer group seeks DOJ investigation into the actions of domestic fertilizer companies.
Treasury Department drops sanctions on Belarus for potash, as DOJ asked to look at anticompetitive behavior by fertilizer companies.

With higher grain prices, farmers have more dollars to pay for inputs — and fertilizer corporations may be taking advantage of that with higher fertilizer prices, according to a farmer group.

The Family Farm Action Alliance sent a letter December 8 to the antitrust division of the Department of Justice seeking an investigation into the fertilizer sector on the suspicion of anticompetitive practices. This follows similar assumptions made by NCGA into the actions by certain domestic players as it regards to the tariffs placed on Morocco and Russia.

Since 2020, all nitrogen fertilizers are now more than double in price: anhydrous is up by 131% and urea by 110%. Potash is up by 120%. In October of 2021 alone, the price of anhydrous fertilizer jumped 26% from the previous month to levels not seen since 2008. Urea increased 21% from the previous months, and the price of potash is now 13% higher, according to the letter to DOJ.

While fertilizer corporations claim these prices are the result of shortages and high natural gas prices, their own annual and quarterly reports refute these claims and reveal they have additional capacity they’re not utilizing. 

“While it’s true that natural gas prices are currently high, Yara’s 2021 third quarter report states explicitly that this has had ‘[l]imited impact on finished fertilizer production to date; Yara is closely monitoring the situation going forward.’ Nutrien’s annual report states that ‘due to historically low global ammonia prices we curtailed production...while maintaining flexibility to respond to improvements in the market condition.’ Their potash capacity likewise exceeds current production levels, and in 2020 the cash cost to produce potash was ‘$59 per tonne, the lowest level on record for Nutrien,’” according to the letter.

Today just two companies supply the entirety of North America with potash, a potassium-based fertilizer: Nutrien Limited and the Mosaic Company. In 2019, a mere four corporations represented 75% of the production and sale of nitrogen-based fertilizer in the U.S. Today, the four dominant firms in this sector are CF Industries, Nutrien, Koch, and Yara-USA. The Family Farmer Alliances says according to experts, market abuses are likely when the concentration ratio of the top four firms exceeds 40%.

“If these fertilizer corporations are tying the price of their products to the farmer's ability to pay rather than supply and demand, that equates to an exercise of near-monopoly power,” says Philip Howard of the International Panel of Experts on Sustainable Food Systems. “Left unchecked, this allows concentrated corporations to exact additional tolls from the supply chain, leaving the farmer with no hope of retaining any gains they produce.”

Family Farm Action Alliance is calling for the DOJ to open an investigation to determine to what extent the actions of these consolidated fertilizer firms are distorting the market, the resulting impact on farmers and whether policy intervention will be necessary to remediate such distortions. 

Potential win with Belarus action

The U.S. Treasury Department’s Office of Foreign Assets Controls agreed to provide a reprieve through April of next year on sanctions on potash fertilizers imported to the U.S. from Belarus. 

“This is a win for the American farmer,” says Iowa farmer and National Corn Growers Association President Chris Edgington. “Farmers are having a very hard time securing fertilizers, so a positive development like this couldn’t come at a better time.” 

NCGA and other groups initiated dialogue in November with the Treasury Department expressing concern that sanctions on potash were resulting in fertilizer shortages across the country. In a letter dated Nov. 4, the groups stated following the announcement that agricultural potash imports would be impacted by the sanctions on Belaruskali, which produces 20% of the world’s potash supply, prices increased by 13% from the previous months and are up 56% year-over-year.

As farmers have struggled to secure and pay for fertilizers and other inputs, NCGA has been sounding the alarm saying that tariffs and sanctions on imports only make a bad situation worse. 

“The American farmer should not have to suffer for the trade practices of foreign governments or for disagreement between multi-national corporations,” Edgington says.  “Yet, that is exactly what happens when sanctions or tariffs are put in place. Farmers pay the price while others profit.” 

American farmers need a diversity of supply, and Belarus is one of the world’s largest potash producers, the groups claim. Wildfires, heavy snows and rail strikes in some years have severely limited availability of potash from Canada, the current largest supplier to U.S. farmers, causing Belaruskali to serve as a supplier of next resort.

The letter added that the impact of sanctions on agricultural potash must be viewed cumulatively alongside other trade actions that are increasing fertilizer prices for producers. All three core plant nutrients – nitrogen, phosphate and now potassium – have seen record-breaking increases in price driven by trade issues either sanctions or trade remedies. Urea ammonium nitrate prices have increased 60% since last year, while certain grades of phosphate fertilizers have seen prices increase more than 75%.

The U.S. Department of Commerce recommended in February 2021 that the ITC implement tariffs over 19% on imported fertilizers from Morocco after the Mosaic Company, which manufactures fertilizers used in the U.S. and abroad, filed a petition with the department seeking the levies. The ITC voted in March to impose the tariffs while adding similar levies on Russian imports.

The Commerce Department also announced November 30 that it had made a preliminary determination in favor of a complaint filed by CF Industries that UAN imports from Russia and Trinidad and Tobago are also unfairly subsidized by their governments. As a result, the Department of Commerce is recommending countervailing duties on fertilizers from these countries. 

In an interview with Ben Pratt, Mosaic senior vice president of government and public affairs, he says if countervailing duties were driving fertilizer prices domestically, you would see higher prices in the United States compared to other world markets. “And that’s not the case either. The price of phosphates certainly is high, and it has risen sharply, and we empathize with farmers about that. But farmers in Brazil are paying the same prices as farmers in the United States and there are no duties on Moroccans or Russians there.”

Pratt notes that while the countervailing duties changed global trade flows, it didn’t change supply and demand.

“One of the reasons that phosphate prices are so high right now is because the prices of materials that we use to make them are all high,” Pratt adds. Ammonia, for instance costs $200 per ton of fertilizer as a raw material.

Pratt also defended claims that Mosaic controls 80% of the domestic market. Instead, he says Mosaic’s market share hovers around 50%, and it hasn’t changed markedly since the countervailing duties were imposed.

 

TAGS: Policy
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