Claims of market manipulation drive national concern over industry consolidation.
On a small vegetable farm in Georgia, Shad Dasher used to grow watermelons every year.
Last year, he didn’t plant any.
Dasher, 56, says it was because of elevated fertilizer prices. Like many of his fellow farmers, Dasher is finding it hard to stay afloat. “The American public just doesn’t understand what kind of beating our group [of farmers] has been taking over the years,” he said.
Fertilizer companies are enjoying the highest profits on record as farmers and others who rely on fertilizer have no choice but to spend more. Although fertilizer prices have fallen from their all-time high in March 2022, when they spiked up to 3.5 times higher than two years before, the commodity is likely to remain costly for some time, continuing to squeeze the food production system.
Meanwhile, the fertilizer industry has yielded record profits. Canada-based Nutrien Ltd., the world’s leading producer of potash fertilizer, saw profits increase 1575% between 2020 and 2022 to $7.7 billion. Tampa-based The Mosaic Co., one of the largest U.S. producers of potash and phosphate fertilizer, made $3.6 billion in net earnings in 2022, a 438% increase from 2020. CF Industries, an Illinois-based fertilizer company, made $3.2 billion in 2022, a 955% increase from 2020.
The eye-popping figures have heightened concerns about consolidation in the fertilizer industry, even as the Biden Administration moves to boost domestic fertilizer production.
When asked for comment, Mosaic said in an email that the fertilizer business is cyclical and thus has volatility in prices.
CF Industries did not respond to requests for comment. Nutrien did not provide a statement by press time.
Why is the price of fertilizer so high?
There are a few clear reasons for the recent record fertilizer prices. The onset of the COVID-19 pandemic in 2020 caused disruptions to the supply chain and labor shortages that hindered production of natural gas, a major ingredient in fertilizer.
Then came a series of natural disasters, such as the February 2021 deep freeze in Texas, which froze natural gas wells and drove up demand for residential heating. In August that year, Hurricane Ida disturbed natural gas and fertilizer production in the Southeast.
Another factor was a reduction in exports from China, the world’s leading producer of phosphate, a chemical element that is a key ingredient of fertilizer.
The war in Ukraine further tightened the market as Western countries sanctioned Russia, the world’s top fertilizer exporter. Disruptions in natural gas flow from Russia led to spikes in European natural gas prices and forced several European fertilizer plants to close or cut output.
Even low water levels on the Mississippi River contributed to price increases, as it limited the amount of fertilizer that could be shipped by barge.
“There were a myriad of reasons why we were seeing this big run up in fertilizer prices. It’s not just one thing. It was literally a whole menu of things that were seemingly going in the wrong direction if you were looking to obtain fertilizer,” said Chad Hart, an agricultural economist at Iowa State University.Several of these factors are referenced in a study Hart co-authored that was hailed by The Fertilizer Institute for providing “the best analysis data will allow to date.” But some argue the study omits a large factor of the price increase: market power as a result of consolidation.
Source: usf.edu/
Photo Credit: GettyImages-D-Keine
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