Although crop prices have nearly doubled, fertilizer prices are now four times higher than 2020, contributing to rising Iowa and U.S. agricultural production costs, according to an Iowa State University report.
Iowa Attorney General Tom Miller requested a report in February, questioning whether the increase was justified. But the six ISU economists who wrote it found no conclusive evidence that fertilizer companies were using their market power to deter farmers.
“Price increases are associated with a number of factors, including supply chain disruptions, disease outbreaks, global conflicts, sudden demand changes, and financial and monetary stimulus,” the 58-page report said.
Those factors include concerns about market manipulation. “We’re not saying it wasn’t for sure,” Chad Hart, an ISU economist and report writer, said Wednesday. “We can’t tease if it’s one of the units.”
John Crespi, one of the report’s authors and the director of ISU’s Center for Agriculture and Rural Development, said researchers needed more data to determine “greed” – taking advantage of inflation worldwide to justify raising prices above the level needed to offset rising costs.
American consumers have struggled with rising costs, with the Consumer Price Index rising 8% over the previous year, the largest annual increase since the 1980s. But farmers have “experienced more significant price increases than the general economy,” the report said.
Inflationary pressures have helped push up prices of corn, soybeans and other commodities. But they have “added to farm costs with the growth of forage, seed, labor and land costs,” the report said.
Miller asked for an ISU study after contacting him with the Iowa Corn Growers Association concerns. Farmers report that some fertilizer prices are more than three times the price they paid in 2021.
US Secretary of Agriculture, former Governor of Iowa, Tom Wilsack, who at the time he supported the Iowa study and warned fertilizer companies and other farm suppliers not to use “an excuse” for Russia’s attack on Ukraine unfairly.
Russia is the world’s top fertilizer exporter, with approximately $ 8.4 billion exported in 2019, the report said. But most of its exports are limited or cut off by Western restrictions.
The report showed that skyrocketing prices of fertilizers such as nitrogen, potash and phosphate outperform their producers’ profits over many other food and agriculture companies. For example, net income from some fertilizer companies has exploded from 2018-19 to 2020-21: the profitability of the crop has increased by 415%, by Mosaic by 418% and by Nutrien by 276%.
Even if those companies report losses in 2018-19.
And researchers said the fertilizer industry has seen consolidation, with the top four nitrogen companies controlling 63% of the market in 2017; And phosphorus companies, 82%. But the industry suffered losses before 2020, though the concentration has largely remained unchanged.
Referring to the high domestic and international prices for natural gas, the key feedstock of nitrogen fertilizers said, “Analyzes suggest that fertilizer prices are more dependent on input costs than production prices, such as rising corn prices, which allow farmers to pay more.” .
Fertilizer companies cite a number of reasons that lead to price increases, the ISU study noted: COVID-198 reduced production, disruptions in natural gas production and price fluctuations, natural disasters affecting production and natural gas demand, and China’s tight global supply exports ban on Russia and Belarus. Restrictions.
The report contains some promising news: “As supply chains improve, ports reopen, workers become more available and energy prices are expected to ease, fertilizer prices will decline in the second half of 2022.”
That is, without significant changes in natural gas demand and supply, trade policy or economic constraints, among other factors.
In addition to Hart and Crespi, ISU economists Christopher Pudenz, Lee Schulz, Oranuch Wangpiabovarn and Wendang Zhang contributed to the report.
Includes agriculture, environment and energy for the Donnell Eller Register. Reach her at [email protected] or 515-284-8457.