Lack of pricing transparency challenges source of fertilizer cost increases
Fertilizer is the largest variable cost for corn farmers across the country, and there is no clear information from manufacturers about how pricing is determined, according to a recent study by Texas A & M University’s Agricultural and Food Policy Center (AFPC). This most recent study builds on previous analysis from AFPC that was initiated by National Corn Growers Association and state corn growers associations in 2022.
A report summarizing the study, requested by Sen. Amy Klobuchar (D-MN) and Sen. John Thune (R-SD), offers understanding for farmers who are frustrated by what appears to be continuous price increase for fertilizers without any context around those increases. The report, Concentration and Competition in the U.S. Fertilizer Industry, is available on the Texas A & M AFPC website.
Between 2021 and 2022, fertilizer prices skyrocketed 89 percent, according to the USDA Economic Research Service. However, row crop planted acres did not spike in relation to that price increase. In addition, the report states that fertilizer industry manufacturers indicate that natural gas inputs account for 70-90 percent of production costs for nitrogen fertilizer. In one example, researchers found the cost of anhydrous ammonia increased 188 percent in April 2021 to April 2022, and that natural gas inputs only accounted for about 20 percent of that increase.
Another variable impacting prices in U.S. fertilizer is the relatively concentrated number of companies that produce the inputs. The report highlights that four manufacturers make about 75% of the domestic nitrogen fertilizer in the United States.
While the researchers emphasize the report is not meant to support or refute what the industry says impacts their costs, they also point out that pay walls and the complexity of the domestic and international production of fertilizer creates a challenge to truly understand pricing drivers.
The report also offers that Congress could endeavor to implement a similar mandatory price reporting standard for fertilizer companies as is required for livestock and meat price markets. “Mandatory price reporting is one tool that Congress has at its disposal to compel the disclosure of that data,” the report states. “If Congress were to go that route, it may also wish to ensure that USDA contracts for independent analysis of the data.”
