The letter accuses fertilizer manufacturers of using market events as an excuse for unnecessarily increasing prices, a practice known as gouging.
The groups point to consolidation in the fertilizer industry begun under a laissez-faire regulatory regime begun in the 1980s.
"Between 1980 and the mid-2000s, the number of fertilizer firms declined from 46 to 13," the letter reads in part. "As demand rose with biofuel policies that incentivized corn production (and subsequently fertilizer) and simultaneously natural gas prices (the main feedstock of nitrogen-based fertilizers) fell with the advent of hydraulic fracturing technologies, this patter of consolidation did not slow, but instead continued on at an aggressive pace."
The consolidation is pronounced among manufacturers of the primary macronutrients: nitrogen (N), potassium (P) and phosphorus (K). By 2019, four corporations represent 75 % of the N-based fertilizer manufacturing in the United States: CF Industries, Nutrien Limited, Koch, and Yara-USA. Two companies control 100% of K production: Nutrien and Mosaic Company. Mosaic also controls about 90% of domestic P production.
"In 2013, Mosaic purchased CF Industries' phosphate business in order to strenghten its dominance in the phosphorus sector, while simultaneously enabling CF Industries to increase its control over domestic nitrogen production," the letter reads in part.
"As a result of this period of rapid consolidation, today the fertilizer industry is controlled by a handful of corporations whose position of market dominance over the three major macronutrients is deeply entrenched," the letter adds. "These corporations are aggressively on the lookout to further strengthen their monopoly control, while expanding into specialty fertilizers, micronutrients, and the retail industry."
Recent events have combined with consolidation to create a perfect storm, the authors say.
"The Russian invasion of Ukraine has provided a convenient shield for fertilizer corporations to hide behind, as their attempts at pandemic profiteering were beginning to attract attention prior to the invasion of Ukraine," the letter reads.
While prices have increased, they've far outpaced the increase in costs, and corporate bottom lines have not been impacted, the letter's authors write.
"In 2021, Nutrien's cost of goods sold did increase by 58% compared to 2020; however, their gross manufacturing margin was up 669% from 2020," the letter reads, citing a Nutrien press release.
CF Industries increased their margin by almost 300% in 2021, though increased prices accounted for 125% of that. Yara reported a 76% increase in U.S. earnings before interest, taxes, depreciation and amortization.
Instead of manufacturing cost, fertilizer companies peg their prices to the sale price of grain, the letter's authors say.
"In effect, these corporations are tying the price of their products to the farmer's ability to pay, rather than to supply and demand — which equates to an abuse of the market," the letter reads. "Such abuses allow concentrated corporations to extract maximum profit out of the supply chain, leaving the farmer with no hope of profitability."
The groups propose a few solutions:
- Increasing the USDA funding in support of domestic fertilizer production to $1 billion from the $500 million announced in March.
- Restricting that funding to independent firms with no significant share of any fertilizer market.
- Eliminating trade barriers that protect domestic manufacturers from competition
- Aggressive merger enforcement to prevent consolidation, like the Prohibiting Anticompetitive Mergers Act, which allows reviews of past mergers
- Limiting corporate expansion into the micronutrients markets
- Expanding support for organic fertilizers, composts, and cover crops, including an expansion of the Pandemic Cover Crop Program to a $10 per acre crop insurance discount from the current $5 per acre.
- Making permanent the EQIP Cover Crop Initiative in the 2023 Farm Bill, and expanding it to cover 20 million acres
- Increased funding for agricultural research programs focused on soil health via cover cropping, fertility sources and other regenerative management practices.
- Increasing knowledge of alternative fertilizers among extension offices.
"To many, the fertilizer industry's rampant price0gouging and other anti-competitive behaviors may seem like a remote problem that only affects the measly 1.3% of the American population who identify as farmers," the letter reads. "This is a dangerously incorrect assumption. The impacts of the sky-high prices imposed by fertilizer cartels will be felt for years to come in the form of fewer farmers staying afloat, depopulated and impoverished rural communities, increasingly consolidated farmland, rising food prices, and empty grocery shelves both here and abroad."
The writers submitted the letter as part of the ongoing public comment process for the fertilizer markets. Not all comments are critical of the fertilizer industry. The call for comment had drawn more than 1,400 responses as of June 20.
The deadline for comments is July 15.