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UIS researchers assess role of ‘greed’ in soaring fertilizer prices

While crop prices have roughly doubled, fertilizer prices are up to four times higher today than in 2020, contributing to rising agricultural production costs in Iowa and the states. United States, according to a report from Iowa State University.

Iowa Attorney General Tom Miller asked The report in February, wondering if the increases were justified. But the six ISU economists who wrote it found no conclusive evidence that fertilizer companies are using their market power to defraud farmers.

“Price increases are linked to a number of factors, including supply chain disruptions, disease outbreaks, global conflicts, sudden shifts in demand, and fiscal and monetary stimuli,” the 58 report said. pages.

These factors include concerns about market manipulation. “We’re not saying it definitely wasn’t there,” Chad Hart, an UIS economist and report author, said Wednesday. “We just can’t determine if it was one of the components.”

John Crespi, one of the report’s authors and director of the UIS’s Center for Agricultural and Rural Development, said researchers need more data to determine whether “greed” – profiting from global inflation as a justification for raising prices above the level needed to offset rising costs – played a role.

U.S. consumers struggled to cope with rising costs, with the consumer price index in April up 8% from a year earlier, the biggest annual increase since the 1980s. But farmers have “faced larger price increases than the broader economy,” the report said.

Inflationary pressures helped push up the prices of corn, soybeans and other commodities. But they also “raised agricultural costs, with spending on feed, seeds, labor and land increasing,” the report said.

Miller requested the ISU study after the Iowa Corn Growers Association approached him with concerns. Farmers reported that some fertilizer prices were three times higher than the prices they paid in 2021.

U.S. Agriculture Secretary Tom Vilsack, a former governor of Iowa, said at the time he supported the Iowa study and warned fertilizer companies and other agricultural suppliers not to using Russia’s attack on Ukraine “as an excuse” to raise prices unfairly.

Russia is the world’s top fertilizer exporter, according to the report, shipping about $8.4 billion in 2019. But many of its exports have been limited or halted by Western sanctions.

The report showed that soaring prices for fertilizers such as nitrogen, potash and phosphate have pushed their manufacturers’ profits to levels above those of many other food and agricultural companies. For example, some fertilizer companies’ net income skyrocketed from 2018-19 to 2020-21: Bunge’s profits increased by 415%, Mosaic’s by 418% and Nutrien’s by 276%.

It’s even with those companies that reported losses in 2018-19.

And the researchers said the fertilizer industry has seen consolidation, with the top four nitrogen companies controlling 63% of the market in 2017; and phosphorus companies, 82%. But the industry suffered losses before 2020, even though the concentration remained almost unchanged.

Pointing to the high domestic and international prices of natural gas, an important feedstock for nitrogen fertilizers, the researchers said that “the analyzes imply that fertilizer prices are likely to be more dependent on input costs than on output prices”, such as higher maize prices that allow farmers to pay more.

Fertilizer companies cited several reasons behind the price increases, which the ISU study noted: lower production due to COVID-198, disruptions in natural gas production and fluctuations in prices, natural disasters affecting natural gas production and demand, and tight global supply compounded by a Chinese market. export bans and sanctions against Russia and Belarus.

The report contains promising news: “As supply chains improve, ports reopen, labor becomes more available and energy prices fall, we expect fertilizer prices fall in the second half of 2022.”

This without significant changes in natural gas demand and supply, trade policy or economic sanctions, among other factors.

In addition to Hart and Crespi, ISU economists Christopher Pudenz, Lee Schulz, Oranuch Wongpiyabovorn and Wendong Zhang contributed to the report.

Donnelle Eller covers agriculture, environment and energy for the Register. Contact her at [email protected] or 515-284-8457.

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