The North Dakota Farmers Union says a letter about high fertilizer prices to its Congressional delegation has brought national media attention to the issue, as well as action by Senator Byron Dorgan (D).
Indeed, the unprecedented run-up in fertilizer prices has been making making national news in recent weeks, with stories appearing in both the New York Times and the Wall Street Journal. One published news report called the numbers “eye-opening,” noting that fertilizer prices in the last year have risen faster than fuel prices. “If you’re looking for a culprit not named biofuels to blame for the global food price run-up, fertilizer fits the profile,” reported the online news source Salon.com.
“The three-fold increase in the cost of anhydrous ammonia alone in just two years defies rational explanation,” said NDFU President Robert Carlson. “We are asking federal lawmakers to investigate whether price gouging practices and price fixing are occurring somewhere below the retail level.”
According to U.S. Department of Agriculture statistics, NDFU says farmers paid 65 percent more for fertilizer in April than they did a year ago. That compares with price increases of 43 percent for fuel, 30 percent for seeds, and about four percent for crop chemicals such as weed killers and insecticides.
NDFU says the WSJ article cites major fertilizer manufacturers as claiming the rise in prices reflects tight supplies and growing demand. However, NDFU maintains that outside analysts claim the industry has plenty of supply.
“We can’t seem to get an explanation for the dramatic increase in prices,” said Carlson. “That’s why we called for this investigation. We are glad Senator Dorgan is pursuing it with the Federal Trade Commission.”
The group says that while makers of potash and phosphate, two ingredients used in fertilizer products, are shielded from certain antitrust rules when it comes to export trade, it is the domestic market that has farmers questioning whether price collusion is occurring.
NDFU cited The Mosaic Co., a Minnesota-based potash and phosphate producer, as an example, saying its stock rose on the New York Stock Exchange from $32 last May to $143 last month. NDFU cited Brent Archer, an options analyst with Investors Observer, who noted online that share prices in the company were falling along with other fertilizer maker shares after the May 27 WSJ article appeared, which cited NDFU’s call for a price-fixing investigation.
Fertilizer companies point to record high farm income; however, National Farmers Union President Tom Buis recently disputed these claims before the Senate Committee on Homeland Security and Governmental Affairs. “As you can imagine, it is very frustrating for farmers who are paying record amounts in input costs to produce a crop, but cannot capitalize on the higher commodity prices to protect their financial risk,” Buis said. “Meanwhile, we continue to read newspaper articles or watch television reports that say farmers are getting rich because of the record high commodity prices, which could not be further from the truth.”
Buis was before the committee to complain that financial speculation in commodity markets is part of a growing problem of pushing agricultural producers out of the futures market. As a result, NFU is calling on the Commodity Futures Trading Commission (CFTC) to conduct a thorough and comprehensive investigation. NFU has urged the commission to increase transparency, place a moratorium on any new commodity index trading, evaluate the role and impact over-the-counter (OTC) trading and swaps, not increase speculative position limits, and take a broader look at the concept of manipulation.
“If CFTC officials are correct and there is nothing wrong with the markets’ function, why are some farmers precluded from participating? Exactly how much institutional and investment money is being invested into the commodity markets?”
He said full access to information in the commodity futures markets is required for farmers to have an equitable position in the marketplace, and for the price of food and energy to be accurately reflective of the market.
“Without a properly functioning and regulated futures market, a train wreck is headed straight for rural America that will jeopardize our ability to continue providing a safe, affordable and abundant food supply for this nation.”