Iowa Fertilizer Plant Sale Opposed

NEVADA, Iowa (DTN) -- Lina Kahn, the chairwoman of the Federal Trade Commission, appeared to listen intently as farmers told her why her agency should step in and block the $3.6 billion sale of an Iowa nitrogen fertilizer plant to Koch Industries.

More than 100 farmers attended a listening session on Saturday with Kahn and FTC staff organized by the Iowa Farmers Union. The farmers oppose Netherlands-based Orascom Constructions Industries (OCI) selling the seven-year-old fertilizer plant on the Mississippi River near Wever, Iowa, in the state's southeast corner.

An added twist to the plant sale is that it comes after an estimated $545 million in federal, state and local tax incentives were approved to help OCI build the plant and operate it. As incentive packages were being put together more than a decade ago, then-Gov. Terry Branstad blamed Koch Industries for spreading complaints about the project. "They want to keep out competition," the Des Moines Register quoted Branstad at the time.

Koch is one of four companies -- along with CF Industries, Nutrien and Yara -- that control 75% of nitrogen supplies

Republicans in Iowa backed the tax credits for OCI but have been largely silent about the sale since it was announced in December. Iowa Democrats opposed funding for OCI, but Democratic legislators wrote the Department of Justice and other federal and state agencies earlier this year calling for investigations into the sale.

"What's going to happen to those hundreds of millions of dollars in tax incentives that were given out to continue this system? Are we going to see the tax incentives that still exist, the ones that are ongoing, be transferred to Koch as they come in and acquire what would be more consolidation and less competition and increasing input prices?" said Iowa state Rep. Megan Srinivas, a Democrat. "Are we going to have them pay back some of what has already been utilized, especially because the whole purpose of having them here has been defeated?"

The plant produces roughly 2 million metric tons (mmt) of nitrogen fertilizer products with the bulk of it liquid UAN.

In selling the plant, OCI also is selling its stake in a fertilizer company in Abu Dhabi. Combined, the two sales are worth $6.2 billion in cash going back to OCI, which wants to "return capital to shareholders," along with looking for other investments in the energy space.

MISSOURI FARMERS WEIGH IN

Harold Beach and Derek England drove to the meeting from Edina, Missouri, where they are board members for Northeast Missouri Cooperative Services Inc. Farmers in that area also rely heavily on the Iowa Fertilizer Co. to add some competition to local fertilizer prices. England said Iowa Fertilizer Co. was offering nitrogen products $70 a ton less than other regional suppliers this spring, including CF Industries and a Koch plant.

"The northeast corner of Missouri is pulling a lot of nitrogen out of that plant as well, and it has definitely had a moderating effect," England said. He added, "Without fail, Koch has always had the highest prices in our area. What is that plant going to be changing once Koch owns it?"

Beach said the sale matters even to small cooperatives. He called on Kahn to have the political will to halt the sale. "I would like you to be fearless and courageous, and be a Teddy Roosevelt, because it matters to all of us."

FTC ROLE

Kahn would not say whether the FTC is investigating the Iowa Fertilizer Co. sale, but she did indicate that holding a public listening session is one of the typical steps the FTC takes when looking into anti-competitive moves.

"If we see monopolistic practices in the market, we're going after them," she said.

Kahn said the FTC typically files a federal lawsuit if its investigation finds antitrust problems in a sale. "Ultimately it's the courts that decide whether we should let it go through or should we not let it go through."

Kahn pointed to other FTC work in agriculture, such as suing two major pesticide companies for not allowing generic manufacturers of pesticides into the market. The FTC also has worked on farmers' rights to repair their own equipment, which drew applause from the crowd.

"We've been reviving our work against illegal repair restrictions," Kahn said. "We've brought a whole set of lawsuits in that vein and are going to be continuing to push forward."

Josh Manske, a board member of the Iowa Farmers Union, was one of multiple farmers who called on the FTC to look into market manipulation of nitrogen prices. The farmers highlighted how nitrogen prices in both 2012 and 2022 soared as corn prices increased.

"It's always interesting when the price of No. 2 corn goes up, our fertilizer goes up," Manske said.

KOCH RESPONDS

A spokesman for Koch Fertilizer in an email to DTN said the company was aware of Saturday's listening session and respects the right of people to voice their opinion. Still, Koch believes the FTC will allow the sale to go forward.

"We have received support from many customers and are confident the Federal Trade Commission will allow our transaction to proceed after they have concluded their analysis and customer outreach," Koch stated.

The company added, "This acquisition builds on the $2 billion in investments we have made in our North American facilities to increase production, enhance safety and reliability, and improve our customers' access to the products and service they need to feed and fuel the world."

Koch stated the company is committed to growing production at the plant in Wever.

"We have been impressed by the Wever employees and look forward to welcoming them to the Koch Fertilizer family. Together, we will continue our history of providing our Corn Belt customers with the excellent products and service they need and deserve."

FARMERS UNION ENGAGEMENT

The Iowa Farmers Union and 18 other groups, including the National Farmers Union and the Union of Concerned Scientists, wrote the Department of Justice and FTC, along with state officials, calling on them to halt Koch's purchase.

Aaron Lehman, president of Iowa Farmers Union, said the proposed sale would reduce the competition in the fertilizer industry the plant was built to produce. In an op-ed, he said of the sale, "It is another painful example of public investments being misused to increase monopolies."

On Saturday, Lehman noted, "The fact that this room is full of concerned citizens here on April 20 right in the middle of a busy spring fieldwork season is a testament to the importance of our topic."

For the National Farmers Union, the fight over the Iowa Fertilizer Co. also fits directly into the "Fairness for Farmers" campaign, which NFU launched three years ago specifically to deal with anti-competitive market practices within agriculture.

"This is huge to have Chair Khan and the resources of the FTC to hear from those in the community who are going to be directly impacted," said Rob Larew, NFU's president, who also attended the listening session.

DIFFERENT TAKE

Scott Henry, who farms near Nevada, said he supports "holding bad actors accountable," but he also noted OCI was originally an Egyptian-owned company when the project began. Now, it could be sold to a U.S.-based company. He urged some caution in ensuring Koch gets a fair shake.

"We have a domestic-owned company looking to buy it," Henry said. "And so, I do think from a foreign-interest standpoint, there are some wrinkles here that we need to just be careful because I do want to continue to support American companies regardless of what I may believe or not believe about their political beliefs or other practices."

Chris Clayton can be reached at Chris.Clayton@dtn.com

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