According to a new report by Iowa State University economists, the sharp rise in fertilizer prices over the past two years does not have a single cause, and the Iowa Attorney General’s Office has been requested to examine the possibility of market manipulation in fertilizer costs.
The report analyzed year-over-year fertilizer prices compared to other commodities such as crops, natural gas and farm equipment. Researchers noted that Covid-19, supply chain issues, international conflicts and natural disasters have contributed to the increase in fertilizer prices.
The researchers said the study could not conclude that “greedy” or companies taking advantage of inflation to artificially raise prices was taking place in the fertilizer market, and more information was needed before making a conclusion.
“The punchline of this report is that it’s not one thing, it’s a whole bunch of reasons why we’ve seen the high fertilizer prices that we’ve done,” said Iowa State economics professor Chad E. Hart said.
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The researchers note that they expect fertilizer prices to decrease for the remainder of 2022 as some varieties on the market ease.
Fertilizer prices have doubled and quadrupled since the fall of 2020, while crop prices have roughly doubled over the same period, prompting Iowa Attorney General Tom Miller to request a study to determine whether producers are taking advantage of inflation and higher farm incomes.
“This entire report raises many good questions that we will continue to explore,” Miller said in a June press release after the report was released. “Although there are a lot of unknowns, we are concerned about crop growth. Income for farmers is matched by an even greater increase in fertilizer costs.
Lynn Hicks, Miller’s chief of staff, said the office will continue to research fertilizer prices and talk to farmers about their concerns.
These concerns have reached a national level: In April, Iowa’s three Republican House representatives signed a letter with dozens of House Republicans urging President Joe Biden to take executive action to address fertilizer costs and ease farmers’ financial burdens caused by fertilizer. will cost
The letter suggested prioritizing fertilizer minerals such as phosphate and potash and increasing US natural gas production and exports.
Iowa representatives signed a March letter urging the US International Trade Commission to remove tariffs on fertilizer from Morocco, which they said were raising prices for farmers.
The ISU report found that an increase in natural gas prices between 2021 and 2022 was a major reason for the recent rise in fertilizer prices.
Prices for natural gas, a key ingredient in most fertilizers, rose sharply in late 2021 due to lower supply and higher demand, the report said. This, in turn, led some fertilizer producers to reduce their production, driving up prices. Sanctions and international pressure from major fertilizer producers China and Russia also affected the global market.
Because of the pressure on the market, researchers can’t conclude that prices are rising and more data is needed to be sure, Hart said.
Farmers are suffering
Farmers are worried about the increase in the price of fertilizer after the fall planting season.
While high crop prices have been able to keep net farm income high, Iowa Farm Bureau President Brent Johnson said that if fertilizer prices don’t drop, many farmers won’t be able to break even.
“If commodity markets continue to erode, the economics experienced by farmers will go into the red, and if grain markets collapse, it could redden significantly,” he said.
Johnson, who farms in Calhoun County, said that between 2021 and 2022 his dry manure costs doubled and his nitrogen costs tripled.
Hart said that the ISU study indicated that prices could drop this year, with that prediction also dependent on the price of natural gas. Johnson said farmers are not confident that fertilizer prices will drop.
Lance Lillibridge, president of the Iowa Corn Growers Association, said the study results were “disappointing” but “expected.” They are still concerned about possible unfair market pressures around fertiliser.
“When companies get a monopoly, in other words, when they start controlling 70 and 80% of a certain product, it’s problematic because it doesn’t allow competition,” he said.
Uncertainty in the market leaves farmers guessing as they plan for 2023. Lillibridge said farmers are unable to obtain fall and spring delivery prices for fertilizer, making it difficult to plan crop production for future seasons.
Both Johnson and Lillibridge said if costs rise next year, farmers may plant fewer crops to save on fertilizer costs, which could pose challenges to the national food supply.
“All we can do is have different scenarios: if it’s x, I’ll do this, if it’s y, I’ll do this,” Lillibridge said. “A whole lot of projects aren’t happening.”