Fertilizer producers’ profits have soared over
the last two years as farmers were hit hard by increased prices, according to a
new study by Iowa State University (ISU) and requested by Iowa Attorney General
Tom Miller.
While crop prices have roughly doubled over
the past couple of years, fertilizer prices are two-to-four times higher than
they were in September 2020. Fertilizer producers have higher profit growth
during the pandemic than many other food and agricultural industries, the
analysis by ISU’s Center for Agricultural and Rural Development (CARD) showed.
ISU believes fertilizer prices may ease in
second-half 2022. “As supply chains improve, ports
reopen, labor becomes more available, and energy prices ease, the expectation
is that fertilizer prices will decline in the second half of 2022,” they said.
However, ISU noted that factors could prevent
fertilizer prices from stabilizing in the short- and longer-term, including
“natural gas demand and supply, changes in trade policy or economic sanctions,
increased acreage demand by farmers, and potential market power in the
fertilizer industry.”
The study said there is not enough evidence to
determine whether fertilizer producers are using their market power to engage
in “greedflation.” Whether “fertilizer firms may be taking advantage of
inflation to raise prices … are good questions for which we need more data,”
according to the report by Agriculture Economist John Crespi, Director of CARD,
and other five other ISU researchers.
Miller thanked ISU for undertaking the study.
“This thorough report raises many good questions, which we will continue to
explore,” he said. “Although there are a lot of unknowns, we remain
concerned that increases in crop returns for farmers tend to coincide with even
higher increases in fertilizer expenditures.”
Earlier this year, Miller announced that his office (GM March 4, p. 1) would examine the unprecedented increases in fertilizer prices after the Iowa Corn Growers Association approached him with concerns. Miller began working with Secretary of Agriculture Tom Vilsack and others, and he requested information from the five major fertilizer manufacturers: The Mosaic Co., Nutrien Ltd., CF Industries Holdings Inc., Koch Industries Inc., and OCI NV, owner of Iowa Fertilizer Co.
The ISU study shows that from 2018-19 to 2020-21, net income for fertilizer companies has increased four-fold in some cases. Bunge Ltd.’s profits increased 415%, Mosaic’s 418%, and Nutrien’s 276%. However, the study noted that many fertilizer companies had negative returns in 2018-19.
The fertilizer companies have cited many
reasons for the price increases, which the ISU study notes: decreased
production due to COVID-19, natural gas production disruptions and price
fluctuations, natural disasters affecting production and natural gas demand,
and tight global supplies compounded by the Chinese ban on exports and
sanctions on Russia and Belarus.
