The Fertilizer Institute (TFI) released a report Aug. 21 showing that the U.S. fertilizer industry supports 244,000 jobs and adds $57.8 billion in value to the U.S. economy. The study, conducted by Charles River Associates International (CRA), found that the fertilizer industry directly employs more than 24,800 people, who produced fertilizers valued at $15.1 billion in 2006. These jobs had an average annual compensation of $76,000, which was almost 80 percent higher than the U.S. average compensation across all industries.
“For the first time, the CRA report quantifies the valuable economic contribution of the fertilizer industry to the U.S. economy,” said TFI President Ford West. “We urge the Senate to review this report with an eye toward potential valuable job losses among the domestic fertilizer industry that could take place if, as we anticipate, climate change legislation leads to higher energy prices.”
The nitrogen fertilizer manufacturing sector provides a total economic contribution of $23.7 billion and 80,000 jobs, of which $10.3 billion and 7,565 jobs were direct, according to CRA. The states with the greatest economic activity dedicated to the nitrogen fertilizer sector are Louisiana, Oklahoma, Iowa, and Alabama.
Phosphate fertilizer manufacturing was found to provide a total economic contribution of $21.2 billion and almost 90,000 jobs, of which $6.6 billion and 7,410 jobs were direct. The states with the most economic activity in this sector include Florida, North Carolina, Idaho, Louisiana, and Texas.
While economic contribution data for the U.S. potash manufacturing sector is not as available as other sectors due to non-disclosure rules, CRA found the potash industry provides an estimated 1,774 direct jobs.
Fertilizer mixing was also identified as a significant contributor to economic activity, with an annual contribution of $13.5 billion in output and more than 56,000 jobs. The sector is more dispersed than nitrogen and phosphate manufacturing, as it is not concentrated in large plants but instead in an estimated 6,000 fertilizer mixing facilities that are located near cropland where fertilizers are consumed. The top states with economic contributions to the fertilizer mixing sector are Indiana, Florida, Texas, California, and Ohio.
TFI noted that fertilizer manufacturing is a trade and energy intensive industry and is uniquely sensitive to the price of natural gas, which is required to make nitrogen. It estimates that gas contributes as much as 90 percent of the cost of producing a ton of ammonia, which is the building block for all other nitrogen fertilizers. In 2008, the nitrogen fertilizer industry spent $3 billion on natural gas. Each $3 mmBtu increase in the cost of natural gas raises nitrogen fertilizer production costs by over $1 billion. TFI notes that these are not costs fertilizer companies can pass on to its customers, as the industry is a price taker in the global fertilizer market.
TFI noted that since 1999 the U.S. nitrogen industry has closed 26 nitrogen fertilizer production facilities, due primarily to the high cost of natural gas. Currently, only 30 nitrogen plants are still operating in the U.S., and over 55 percent of the U.S. farmer’s nitrogen fertilizer is imported. Of this imported fertilizer, 82.7 percent comes from countries without climate change policies in place to regulate carbon, and a majority of these countries are those from whom we are striving for energy independence.
Any additional loss of U.S. fertilizer production could pose risks for the world’s food supply. “It is estimated that fertilizers are responsible for between 40 and 60 percent of the world’s food supply,” according to the report. “A quick calculation shows that if 50 percent of U.S. agricultural production is dependent on fertilizer, fertilizer use in the United States alone provides an economic value of up to $300 billion. If even half of the fertilizer is assumed to be domestically produced, that translates to a domestic ‘use’ value of $150 billion, or 10 times the production value for the industry.
“The ‘use’ value goes beyond economic value to the U.S. agriculture industry. In a world market struggling to keep food supplies apace with growing demand, agricultural products and fertilizers exported from the United States are important on a humanitarian level. If costs of U.S. agricultural products are increased as a result of a less-than-stable U.S. supply of fertilizers, the economic consequences could be large. This value of the U.S. fertilizer industry could well exceed the substantial measurable portion of the economic contributions of domestic fertilizer manufacturing that were estimated in this report.”
A full copy of the CRA report is available at www.tfi.org.
Ironically, natural gas prices last week were the weakest in 7½ years. The September NYMEX futures price expired at $2.843/mmBtu (see page 2). The question is whether Congress will consider the history of gas prices in looking at Cap and Trade legislation, or will it be more persuaded by the current gas market.