The uncertainty facing farmers has skyrocketed in the past year. A combination of the COVID-19 pandemic, supply chain, as well as labor issues, and the highest inflation rate in more than 40 years with no clear end date or solution in sight is cause for extreme concern within the agricultural community.
One of the biggest threats is rising fertilizer costs and the fact that available supply does not match demand here in the U.S. According to a recent Texas A&M University Agricultural and Food Policy Center (AFPC) report, fertilizer prices are already up as much as 200% year-over-year and expected to continue to increase for the 2022 planting season.
While these costs reflect a perfect storm of events and certain factors fueling escalating prices can’t be controlled directly, we certainly don’t need to make matters worse for U.S. farmers. Unfortunately, that’s just what our government has done. Phosphate fertilizer prices have increased more than 90% since the U.S. Department of Commerce announced its decision to impose countervailing duties (CVDs) of 20% on imports of phosphate fertilizers from Morocco, according to USDA.
Clearly, this was a poor decision, given that the U.S. doesn’t have enough supply to meet demand without reliable foreign partners. Morocco holds more than 70% of the world’s phosphate reserves—they are a long-time ally and supplier to the U.S., accounting for about 60% of the imported supply on which U.S. farmers rely.
It’s a prime example of crony capitalism, as the decision to impose CVDs was made at the behest of The Mosaic Company—a giant domestic corporation who now holds more than 90% of the production market for phosphates in the U.S. This gives Mosaic the greatest pricing power in the market, allowing them to successfully and artificially drive-up prices on their competitors.
To make matters worse, the Commerce Department recently made a preliminary determination to impose countervailing duties on urea ammonium nitrate (UAN) fertilizer from Trinidad and Tobago, an established regional trading partner. That determination, though in preliminary stage before Commerce takes final action, still includes requiring cash deposits equal to the duties. The decision couldn’t have come at a worse time, as nitrogen fertilizer prices hit an all-time high at the end of November 2021.
Like Moroccan imports of phosphate fertilizer, imports of UAN from Trinidad and Tobago are critical to meeting farmers’ supply needs in the U.S. Trinidad and Tobago exported 996,136 short tons to the U.S. last year, valued at $99.7 million. Guess what’s going to happen if the Commerce Department moves forward with imposing more CVDs on our foreign partners?
More than 80 members of Congress recently sent a letter to the U.S. International Trade Commission (ITC) urging for the elimination of duties placed on fertilizer imports to remedy the high costs of fertilizer facing U.S. farmers. The letter states, “Given the last several years’ unprecedented volatility for farmers and ranchers, it is crucial America avoids imposing unnecessary duties that could further limit the fertilizer supply or raise its cost.”
The average feed grain operation will already pay $128,000 more for fertilizer in 2022, according to the Texas A&M University AFPC report. However, the new import tariffs imposed will last much longer than this year. Theses duties do not sunset for at least five years.
Agricultural markets are volatile enough. When the government intervenes with unnecessary and detrimental protectionist tariffs that shut off critical sources of imported fertilizers on which U.S. farmers rely, it’s U.S. farmers who pay the price of shortages and higher costs for fertilizer. It’s time for a recourse.
The ITC should seriously consider waiving CVDs on imports of phosphate fertilizers from Morocco and to halt the process of imposing CVDs on UAN fertilizer from Trinidad and Tobago. U.S. farmers can’t take another blow.
Bob Young is the former chief economist for the American Farm Bureau Federation, co-director of the Food and Agricultural Policy Research Institute and faculty member of the University of Missouri and past chief economist for the United States Senate Committee on Agriculture, Nutrition and Forestry.
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