Kaiser & Juday: How to Lower Skyrocketing Fertilizer Costs for Farmers

The price of fertilizer is not a topic that regularly makes its way into general news coverage. Enter Russia’s invasion of Ukraine , and for the past couple of months, there has been a flurry of stories in the press about fertilizer supply and prices with phrases such as “global shortage,” “skyrocketing prices,” and a resulting “food crisis.”

The heightened concern is warranted. Russia is the world’s largest exporter of fertilizers. The United States has a robust fertilizer manufacturing sector, but the overall balance of global supply and demand affects prices here in the U.S. as well as in other countries.

New sanctions on trade with Russia are justified and meant to restrict that country’s export revenue, but the pressure applied by sanctions effectively reduces the available supply of fertilizer on the global market.

As President Joe Biden recognized in his recent speech at NATO headquarters, “the price of these sanctions is not just imposed upon Russia. It's imposed upon an awful lot of countries as well, including European countries and our country as well."

However, the same is true for duties and tariffs placed on other sources of global fertilizer. That is in fact the case with Morocco and Trinidad and Tobago, key suppliers of fertilizers to the U.S. Those two reliable sources of needed fertilizer supplies for the U.S. are subject to needless and harmful tariffs that have already added costs to U.S. farmers’ bottom line and our food and feed value chain.

The Department of Commerce announced in November that it had made a preliminary determination to impose duties on urea ammonium nitrate, or UAN, imports from Trinidad and Tobago. The U.S. has already begun collecting preliminary cash deposits on imports, effectively imposing tariffs before the final decision. That process began in July of last year, and the market started pricing in the possible effect of the tariffs then. Further, the Biden administration is considering additional duties on UAN from Trinidad and Tobago.

Similarly, the Trump administration announced its decision in November 2020 to levy new tariffs on phosphate fertilizer imports from Morocco. Typically, a third or more of U.S. domestic phosphate fertilizer demand is necessarily supplied by imports. Morocco is home to 70% of the world’s phosphate reserves. Traditionally, the top three global exporters of phosphate fertilizers have, in order, been China, Morocco, and Russia. The duties imposed on Moroccan phosphates left a scant 15% of the world’s supply not subject to U.S. tariffs. In short, America’s dominance as an agricultural producer and exporter cannot be maintained without sufficient access to imported fertilizer.

Since the beginning of the process leading into the imposition of tariffs on phosphate fertilizers, through the third week of March (a month into the war), the price of monoammonium phosphate, a benchmark phosphate fertilizer product, has increased 125% , with 13% of the increase since Russia invaded Ukraine.

Since the tariff imposition process began for UAN, all nitrogen fertilizers have seen dramatic price increases because there is a degree of substitutability among the products. The best benchmark is anhydrous ammonia. Since July of last year, as tariffs were proposed and then preliminarily approved, anhydrous ammonia prices increased 273%. Only 4% of that increase has come since the war started.

It's true that the timing of the U.S. tariffs on phosphates and UAN added to the elements of a perfect storm of price pressure, including increased demand post-pandemic, additional planted acres, high crop prices, and supply chain disruptions, as well as weather disruptions and restrictions on natural gas production.

However, what prices need now is swift and targeted action, not diversions into the structure of the industry or the #PutinPriceHike social media campaign by the White House. As a bipartisan group of more than 80 lawmakers rightly pointed out in a letter to the International Trade Commission, reversing the U.S.-imposed tariffs on reliable suppliers such as Morocco and Trinidad and Tobago, tariffs that otherwise would remain in place for five years, provides “the most immediate opportunity for a near term, partial remedy to the high costs of fertilizer facing U.S. farmers before the end of the 2022 planting season.”

Kent Kaiser, Ph.D., is executive director of the Trade Alliance to Promote Prosperity. Dave Juday is the founder and principal at The Juday Group.