While CF Industries Holdings Inc. was grilled by U.S. International Trade Commissioners (ITC) at a hearing on June 16 in CF’s antidumping (AD) and countervailing duty (CVD) cases pertaining to UAN imports from Russia and Trinidad and Tobago, on June 28 Judge Stephen Vaden of the Court of International Trade questioned The Mosaic Co., as well as ITC lawyers, about ITC’s imposition last year of duties on phosphate imports from Russia and Morocco.

“We have been banging on the doors in Washington, sounding the alarm and telling federal officials that tariffs are hurting farmers,” said National Corn Growers Association (NCGA) President Chris Edgington. “This week, we saw some results as a judge with the Court of International Trade began asking tough questions about the assertions made by fertilizer companies.”

NCGA testified at the CF ITC hearing June 16 that shortages of nitrogen fertilizers are placing an undue burden on farmers and could eventually be detrimental to the global food supply. NCGA also called on the Biden administration and Congress to step in if CF and Mosaic do not move to withdraw their ITC petitions.

CF and Mosaic opponents have not only argued over the AD/CVD claims, but also that there is anticompetitive consolidations in the U.S. phosphate and nitrogen industries.

The Agricultural Retailers Association, American Soybean Association, and the National Association of Wheat Growers filed post-hearing arguments in the UAN case, saying that domestic concentration is not necessarily problematic if adequate measures exist to deter rent-seeking behavior (when an entity seeks to gain added wealth without any reciprocal contribution of productivity), however, that the balance has been tipping as the largest domestic providers have sought to effectively shut out the largest exporters from the most concentrated parts of the domestic industry.

The three groups said that the domestic industry for UAN has a 3,100 score on the Herfindahl-Hirschman Index (HHI), which is used by the Department of Justice to rate market concentration. It said DOJ considers a score of 2,500 to be highly concentrated, warranting close scrutiny for further concentration.

“Flush with record profits and contemplating shortages of fertilizer and food that present ‘a problem of epic proportions,’ the petitioner presses the groundless claims that the domestic UAN industry is suffering present injury and is threatened with injury,” said International Raw Materials (IRM) in its post-hearing brief. “This case never should have been filed.”

IRM said the petitioner’s theory is that increased imports created an inventory overhang that resulted in reduced prices and profits in 2020. IRM said there were three problems with this theory. “First and foremost, there was ‘no’ inventory overhang.” IRM cited the testimony of James Dougan and analysis by his company, ION Economics, that showed that by every measure, the overhang claim is illusory.

“Second, as the Commissioners understood in their questioning, any declines in profits and prices were due to loss of the European Union export market. While Mr. Will [CF President and CEO Tony Will] blames imports for increasing in 2019, he fails to mention that the U.S. market was under- and unreliably served as CF exported 970,000 tons to the E.U. [including the U.K.] in 2018. It was because of CF’s focus on exports in 2018 that the U.S. market needed more subject imports. But, with the E.U. antidumping determination, CF and other domestic producers ‘repatriated’ that 970,000 tons and exports to the E.U. fell to almost zero in 2020, as noted by Vice Chair [Randolph] Stayin.

“By 2020, subject imports declined by almost 600,000 short tons and lost 3.5 percentage points in market share,” IRM added. “The domestic industry and non-subject imports picked up that share.

“It is axiomatic that those with the lowest prices are the ones that gain market share,” said IRM. “So, the decline in prices and profitability in 2020 were caused by the domestic industry’s export volume loss and decision to unload large volumes at low prices.”

IRM cited other cases in which the Commission entered a negative determination because any injury to the domestic industry was a result of the industry’s decline in export shipments and lower prices rather than subject imports.

“Third, the dip in profitability almost two years ago was temporary, and not injurious,” said IRM. “Moreover, any profit decline was not caused by subject imports. Indeed, as demand began picking up in second half of 2020, prices began rising.

“The petitioner attempts to portray its astonishing profitability in 2021 as a post-petition effect,” added IRM. “But as the Commissioners’ questions recognized, the improvement in pricing began months before the petition was filed. And while the petitioner bemoans its profitability in the first quarter of 2021, it ignores that the profitability problems were due to shutdowns and curtailments due to poor weather conditions.”

“Only the lone petitioner, CF, appeared on behalf of the domestic industry at the Commission’s hearing,” noted the post-hearing brief by Gavilon Fertilizer LLC. “This is telling. The rest of the domestic industry, representing the other half of U.S. production, is likely more focused on enjoying the major success of 2021 and the first half of 2022 than asking for trade protection.”

“One of those domestic producers, CVR, has recently discussed the ‘supply issues we have in the United States’ and stated regarding this case that if Russian or Trinidadian UAN imports are reduced or eliminated, it ‘would create additional supply issues in the U.S. over time.’” Gavilon said CF’s claims that there are no supply shortages in the U.S. market are “flat-out” wrong.

Gavilon noted that the NCGA explained the major problems that the nation’s farmers are experiencing in procuring and paying for fertilizers. Gavilon added those shortages occur against the backdrop of investigations by State Attorney Generals and the USDA of anticompetitive behavior by the U.S. fertilizer industry.

“It is disappointing to see CF’s lack of empathy at the hearing to the plight of America’s farmers and presumptive paternalism amidst CF’s dominance of supply in the U.S. market, but not surprising given the fact that CF held the food supply of the United Kingdom hostage to extract a government payout,” said Gavilon.

“In short, this case is about a wildly profitable petitioner that lacks a theory of the case that is supported by the Commission’s record,” Gavilon continued. “This domestic industry has not suffered material injury by reason of subject imports or threat thereof, and does not need trade protection.”

“The Commission itself and the Commission’s reviewing courts have consistently held that a domestic industry must be suffering ‘present’ material injury by reason of subject imports in order for the Commission to grant relief,” said Methanol Holdings (Trinidad) Ltd. (MMTL) and Helm Fertilizer Co. (HFC) in their post-hearing brief. “This conclusion is derived from the fact that U.S. trade relief statutes are designed to be remedial, not compensatory, and that if a domestic industry is not presently suffering material injury, no relief is warranted. Thus, even if all of petitioner’s arguments were true, which they are not, a negative determination would still be required.

“Petitioner could hardly say with a straight face that it is today suffering material injury from any source,” they added.

EuroChem added that CF claims an increase in imports in 2019, yet it did not file a petition until two years later in June 2021. It said the filing is unsupported by an antidumping statute that requires “current” injury, and that was not the case at the time the petition was filed.

Gavilon continued with its argument that CF’s Donaldsonville plant on the water in Louisiana was designed in large part for export orientation. “Although respondents were not present at the CF Industries Board meeting where that project was approved, respondents (and the Commission) can read CF’s 2014 annual report, which was issued before Donaldsonville’s opening and explains: ‘This access will enable us to export a significant amount of annual production out of Donaldsonville in any given year’ and ‘we have the flexibility to be agnostic about the ultimate destination of our products.’”

MTHL/HFC cited a Green Markets story dated April 1, 2016, quoting CF’s Will stating that “the company sees Donaldsonville as a major UAN export port,” and that the country will need about “2.5-3 million st (of imports), depending on CF’s volume of exports.”

EuroChem and Acron pointed out that CF only had one Jones Act vessel to transport UAN to coastal regions from 2018-2021. “CF claims that it invested billions in U.S. UAN production, but did not invest in additional Jones Act vessels to ship to the U.S. Coasts, only further confirming that the U.S. investment was for production of UAN for export,” said EuroChem.

Acron said that it did not sell into the U.S. on a consignment basis and that CF cannot even demonstrate that such arrangements exist. “The importation of UAN is not ‘free,’” said Acron. “Acron’s contracts create no incentive to drive prices down in the U.S. market. Indeed, the only actor driving down prices in the market is CF.” Acron also reiterated its own shift from UAN to granular products.

Gavilon said that CF’s theory about unpriced consignment sales causing negative price effects is not borne out by the data, but instead “the data on the record show that sales of imports are more often than not higher priced than domestic shipments.”

“When CF lowered its prices in 2020, imports predictably declined,” said Gavilon. “Gavilon and other distributors of imported product have every incentive to sell that imported product at the highest price allowed by the market, and these markets structures are reflected in the record’s majority overselling data.

“The domestic industry’s profitability went from excellent in 2019, to mediocre in 2020, to incredible in 2021,” said Gavilon. “Subject import trends cannot explain these changes in domestic industry performance. When domestic profits were excellent in 2019, subject imports were at their highest levels during the period of investigation. When domestic profits declined in 2020, subject imports were also declining. When domestic profits skyrocketed in 2021, subject imports were fairly flat. All while subject imports were majority overselling.”

“Finally, an injured industry does not buy back millions of dollars of its own stock,” said Gavilon. “It certainly does not even contemplate buying back ‘$2.5 billion’ of its stock. But this is exactly what CF has done. It bought back $1 billion during the POI, and immediately launched a new $2.5 billion stock buyback program starting at the end of the POI. CF also announced a 33% increase in its dividends paid to shareholders for Q1 2022. CF’s stock price is a darling of the S&P 500 even in this bear market, trading at many multiples of its share price just two years ago.”

Gavilon noted that the Commission only looked at CF’s recent public statements that the UAN industry is strong and is expected to continue its strength for the foreseeable future, reminding them of CF’s Will’s statement in February 2022 “that the party is just beginning.”