Mosaic: Global Issues Push Prices Up
Mosaic: Several Factors Driving Up Fertilizer Costs; Some Groups Disagree
OMAHA (DTN) -- The countervailing duties on Moroccan and Russian phosphate exports Mosaic pushed for earlier 2021 are not the reasons farmers are now seeing significantly higher fertilizer prices, according to a Mosaic official. The real reasons for extremely high fertilizer prices include higher fertilizer demand, supply disruptions and increasing costs associated with manufacturing fertilizer, the official said.
Despite these claims, some ag groups are not pleased with Mosaic and are asking for them to end fertilizer tariffs. One U.S. senator announced Friday he is asking for a Department of Justice (DOJ) investigation into fertilizer prices.
NOT MOSAIC'S FAULT
Andy Jung, Mosaic vice-president of market and strategic analysis, told DTN that despite the trade dispute, phosphate imports into the U.S. hit a record level in 2021. U.S. phosphate imports have increased by 1.3 million metric tons (mmt) in 2021, which is 57% higher than during the same January-to-November period in 2020.
While trade patterns have changed, nothing with the tariffs have changed overall supply of phosphate in the world or in the U.S., he said.
If anything, this situation has resulted in a more balanced and fair-trade market. This creates a more competitive environment with trusted and reliable suppliers for American farmers and American agriculture long term, he said.
Jung said Mosaic is committed to U.S. farmers, and because of this, the company adjusted their typical trade volumes in the global market. They have purposely diverted fertilizer tons away from the international market to boost availability domestically.
"Normally, it is roughly 50% domestic and 50% into the international market, but now we put 60% into the domestic market and 40% in the international market," Jung told DTN.
Jung said the phosphate price in the U.S. is anywhere from $20 to $100 per ton less compared to other parts of the world. Other markets, such as India, have seen a greater increase in price because of the lack of Chinese phosphate exports into the world market.
NCGA v. MOSAIC
While Mosaic said the countervailing duties did not have an effect on the higher fertilizer prices, other groups disagree.
The National Corn Growers Association (NCGA) issued a news release Friday saying they sent a letter to Mosaic urging the company to end the fertilizer tariffs and to "stop engaging in irresponsible corporate behavior." (https://ncga.com/…)
"Mosaic's posture to date has been a masterpiece of irresponsible corporate social responsibility," the letter said. "We ask you voluntarily withdraw your countervailing duties and allow critical supply back into the U.S. at a time of inadequate supplies and soaring phosphate prices."
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The letter also said estimates show the tariffs of 30% and 70% on phosphate imports would equate to roughly $480 to $640 million in added fertilizer bills on U.S. farmers.
While Jung had not seen the NCGA release, he said there was a good reason for his company to push for the duties on imported phosphates. Mosaic feels it is an unfair playing field and imports have injured the U.S. phosphate industry.
If the company had not persuaded this tariff, this issue would not have been addressed and the company would have continued to lose business to exports. Running a domestic supplier of phosphate fertilizer out of business would not help American agriculture, he said.
"Without strong domestic supplies, American farmers are beholden to phosphate exporters," he said.
GRASSLEY PUSHES FOR INVESTIGATION
Also on Friday, U.S. Senator Chuck Grassley. R-Iowa, announced he sent a letter to U.S. Attorney General Merrick Garland calling on the DOJ to investigate possible anti-competitive activity and market manipulation in the fertilizer industry (https://www.grassley.senate.gov/…).
Grassley's news release said fertilizer companies have the means available to manipulate the price farmers pay due to having limited participants. Farmers have seen fertilizer prices rise dramatically in 2021.
"I have heard numerous concerns from Iowans and member organizations expressing concerns that fertilizer companies are colluding and unfairly raising the price of their products," Grassley wrote. "The DOJ should initiate an investigation of the fertilizer market so that farmers across the country can have assurances that there are no violations of U.S. antitrust law in the fertilizer industry."
Jung said he doesn't believe anti-competitive and market manipulation activity is taking place in the fertilizer industry.
REASONS PRICES ARE HIGHER
Jung said there are three main reasons why fertilizer prices are considerably higher. One is that fertilizer demand increased with higher commodity prices.
Demand for fertilizer has increased as farmers try to capture additional revenue from high crop prices, he said. The outlook for U.S. commodity exports remains strong in 2022, with higher grain prices driving higher fertilizer demand.
The second reason for higher fertilizer prices would be trade and supply disruptions in 2021.
Jung said China, which accounts for 25% of global phosphate exports, recently banned all phosphate fertilizer exports through June 2022. This drastically decreased global supply and added to the pressure of global fertilizer prices, he said.
In addition, global fertilizer supply faced weather challenges in 2021. Hurricane Ida hit the Gulf Coast region this fall, which shut down weeks of production for both nitrogen and phosphate manufacturing.
And the final reason why fertilizers are higher is the higher costs associated with producing fertilizer, Jung said.
Jung said the industry has seen a raw-material price increase, and it now costs more to produce phosphate fertilizer than in the past. Examples of this are the cost of ammonia, which has increased 288% year over year, and sulfur, which is up 165%.
Other factors, such as supply chain issues, have had a large effect on ground and vessel transportation costs, Jung said.
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Editor's Note: DTN recently looked ahead at what factors could affect the global fertilizer market and fertilizer prices in 2022 in our three-part Global Fertilizer Outlook series. To see those stories, go to:
"World Nitrogen Demand to Increase in 2022 Despite Considerably Higher Prices"
"Geopolitical, Trade Disputes Darken Phosphorus Outlook in 2022"
"Sanctions Could Affect World Potash Supply in 2022"
Russ Quinn can be reached at russ.quinn@dtn.com
Follow him on Twitter @RussQuinnDTN
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