Fertilizer Study Sheds Light on Higher Prices

OMAHA (DTN) -- Evidence appears to back the fertilizer industry's claims that increased production costs and supply chain issues were responsible for higher fertilizer in 2021 and 2022, but more data is needed to support claims by some groups that fertilizer companies have engaged in price gouging, according to a new Iowa State University (ISU) report.

The recently released report (https://www.card.iastate.edu/…), which was requested by Iowa Attorney General Tom Miller back in February 2022, sheds more light on the recent fertilizer price spike and what is going on within the industry currently.

DTN wrote about Miller's look at the fertilizer industry and the ISU study earlier in February 2022 (https://www.dtnpf.com/…).

The report by ISU's Center for Agricultural and Rural Development said the expectation is fertilizer prices could decline in the second half of 2022. However, there are several factors that could prevent fertilizer prices from stabilizing both in the short and longer term, the report said.

RISING COST, SUPPLY ISSUES KEY

The report said the hypothesis that increased production costs and supply chain issues were the main cause of higher fertilizer prices in 2021 and 2022 appears to be true. These issues have pushed fertilizer prices to historically high levels over the past two years.

Because of these issues, the report also states, there is evidence the fertilizer market has seen some structural changes. Statistical analyses of these changes point to underlying energy costs and, to a lesser extent, increased farm demand having more influence on fertilizer prices.

However, ISU was unable to determine whether the claim by some food and agriculture groups that fertilizer companies have engaged in price gouging is true.

"The argument that fertilizer firms may be taking advantage of inflation to raise prices raises more questions than answers at this point," the report said. "Nevertheless, they are good questions for which we need more data."

The report also said comparisons of the fertilizer industry to other food and agricultural industries shows similarities and differences in terms of stock prices, net income, etc.

In some cases, the fertilizer industry looks different than other industries, while in other cases, the industry has performed better than many food and agricultural industries, the report said. The lack of good data on these factors that have affected the fertilizer marketing chain and costs for fertilizer during the COVID-19 pandemic hampers using statistical methods to discern market power, according to the report.

Another point the report makes is Iowa farmers do have other options when purchasing nutrients.

The report said manure, for example, can be used as a crop nutrient. However, manure's market development is not to the point that this option can be used as a relief from higher fertilizer prices.

IOWA AG: STILL WATCHING INDUSTRY

In a news release (https://www.iowaattorneygeneral.gov/…), Iowa Attorney General Miller thanked ISU for studying high fertilizer prices and creating the report and promised his office would continue monitoring the situation.

"This thorough report raises many good questions, which we will continue to explore," Miller 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."

In February, Miller announced his office would take a closer look at the large increases in fertilizer prices after the Iowa Corn Growers Association and other ag groups approached him with their concerns. At that point, Miller began to work with USDA Secretary and Iowa native Tom Vilsack and others to collect information.

The Iowa Attorney General also requested information from the five major fertilizer companies: Mosaic, Nutrien, CF Industries, Koch Industries and OCI N.V. (owner of Iowa Fertilizer Co.).

DTN tracks retail fertilizer prices, and current prices are dramatically higher than they were a year ago. Prices range from 46% to 111% higher compared to last year.

One positive aspect is that in the past few weeks, prices for some retail fertilizers have moved lower compared to last month. Prices have moved lower for three consecutive weeks, although no fertilizer has seen a significant price decline, which DTN states as 5% or more (https://www.dtnpf.com/…).

Russ Quinn can be reached at Russ.Quinn@dtn.com

Follow him on Twitter @RussQuinnDTN

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