OMAHA (DTN) -- Imported phosphorus fertilizer could become more expensive after the U.S. Department of Commerce took a step this week towards putting tariffs on product from Russia and Morocco.
The tariffs recommended for imported phosphorus would raise the costs anywhere from 9% to 47%, depending on the supplier, for a market amounting to roughly $1 billion annually.
The potential duties come after the U.S. Department of Commerce announced on Tuesday it has determined phosphorus fertilizer imports from Morocco and Russia are unfairly subsidized through unfair loans, tax breaks and other methods in those countries.
The U.S. International Trade Commission (USITC) is also investigating and is expected to hand down a decision in March. If USITC reaches the same conclusion as Commerce Department officials, then countervailing duties will be issued and put in place for five years.
The U.S. Department of Commerce calculated a subsidy rate of 19.97% on Moroccan producer OCP, while rates of 9.13% and 47.05% were established for Russian producers PhosAgro and EuroChem, according to a Mosaic news release Wednesday. All other producers will see a rate of 17.2%.
The U.S. in 2019 imported 2 million metric tons of phosphorus from Morocco -- up about 11% in volume -- totaling $729.4 million, which was down about $41.6 million in value from 2018. Phosphorus imports from Russia in 2019 were 767,288 metric tons, down about 18% from 2018, or about $299.4 million.
MOSAIC FILES PETITION
The Mosaic Company, the largest phosphorus producer in the U.S., filed petitions last June with the U.S. Department of Commerce and USITC to request the start of countervailing duty investigations into imports of phosphorus from Morocco and Russia, according to Rabobank Farm Input Analyst Samuel Taylor. Mosaic maintains foreign subsidies are unfair and these duties would restore competition in the U.S. market.
On the other side of the issue is Moroccan fertilizer giant OCP. The fortunes of OCP have a major effect on the economic well-being of Morocco as OCP alone makes up about 5% of the GDP of the North Africa country, Taylor said.
OCP said in a news release this week the company continues to cooperate with U.S. authorities "and is determined to remain a reliable partner to U.S. farmers." OCP stated its executives continue to believe "firmly" there are no grounds for imposing countervailing duties on Moroccan fertilizer imports.
Mosaic, meanwhile, disagreed. The company maintains subsidies in Morocco and Russia give those companies unfair cost advantages. Mosaic said in a news release Wednesday the company "appreciates" the importance of the ruling for the U.S. phosphorus industry.
HIGHER FERTILIZER PRICES
Taylor said one of the issues Mosaic has with the world's major phosphorus producers is the sheer number of plays these producers have in these foreign lands. They believe it is extremely unfair that government subsidies exist in such an expansive global industry, he said.
Because of this trade dispute, Russian and North Africa phosphorus producers have stayed out of the U.S. market in the latter half of 2020. Imports into the U.S. slowed in the third quarter of last year, he said.
Taylor said this time of year is also when global utilization rates of fertilizer producers tend to be lower, so less supply was already heading to the market. U.S. farmers also saw an early fall harvest in 2020, thus allowing more fertilizer application after harvest to be completed.
In addition, the trade dispute happened about the same time as crop prices started to climb in the U.S., he noted. This, too, pushed the price for nearly all fertilizers even higher.
"There has almost been a perfect storm of events," Taylor told DTN.
This situation has also led to issues with nutrient supplies in other parts of the world.
Taylor said he recently talked to someone with much knowledge of the Australian fertilizer market and the person was concerned about phosphorus supply there. Much of the phosphorus supply Australia normally receives is set to come to North America to refill supplies after the strong fall fertilizer application season, he said.
SOME GOOD NEWS
There might be some good news coming in 2021 for farmers regarding fertilizer costs and global fertilizer prices.
Taylor believes with much fertilizer applied in the fall of 2020, or at least locked in before prices really started to rise, U.S. crop farmers will not face higher fertilizer costs with 2021 crops. Higher fertilizer costs will be more obvious for the 2022 crop, he said.
Taylor believes once the news of the countervailing duties is absorbed in the fertilizer import market, at some point phosphorus fertilizer prices will fall back some. He expects prices to fall off in the second or third quarter of this year.
"I don't think these elevated phosphorus prices will be here forever," he said. "There [are] just a lot of factors influencing the market right now."
DTN Ag Policy Editor Chris Clayton contributed this report.
Russ Quinn can be reached at Russ.Quinn@dtn.com
Follow him on Twitter @RussQuinnDTN
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