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A sharp rise in farm fertilizer prices over the past two years doesn’t appear to have one single cause, according to a new report from Iowa State University economists requested by the Iowa Attorney General’s Office to examine the possibility of market manipulation.
The report analyzed year-over-year fertilizer prices compared with other goods such as crops, natural gas and farm equipment. Researchers noted that COVID-19, supply-chain problems, international conflicts and natural disasters have all contributed to the rising cost of fertilizer.
The study wasn’t able to conclude that “greedflation,” or companies taking advantage of inflation to artificially hike prices, is happening in the fertilizer market, and the researchers said they needed more information before making a determination.
“The punch line of this report is that it's not one thing, it was a whole fleet of reasons why we saw the high fertilizer prices that we did,” said Chad E. Hart, an Iowa State economics professor who worked on the study.
The researchers also noted that they expect to see fertilizer prices fall over the rest of 2022, as some of the strains on the market ease.
Fertilizer prices are between two and four times higher than they were in fall 2020 while crop prices roughly doubled in the same period, prompting Iowa Attorney General Tom Miller to request a study to determine if manufacturers were taking advantage of inflation and high farm incomes.
“This thorough report raises many good questions, which we will continue to explore," Miller, a Democrat, said in a June statement after the report was released. "Although there are a lot of unknowns, we remain concerned that increases in crop returns for farmers tend to coincide with even higher increases in fertilizer expenditures.”
The office will continue researching and talking to farmers about their concerns, Miller’s chief of staff, Lynn Hicks, said.
These concerns have also reached the national level: In April, Iowa’s three Republican House representatives signed on to a letter with dozens of House Republicans urging President Joe Biden to take executive action to address the cost of fertilizer and ease farmers’ financial burdens stemming from fertilizer costs.
The letter suggested prioritizing fertilizer minerals like phosphate and potash and increasing the U.S.’s natural gas production and exports, among other measures.
Iowa representatives also signed on to a March letter urging the U.S. International Trade Commission to remove tariffs on fertilizer from Morocco, which they said were driving prices up for farmers.
One major cause of the recent rise in fertilizer prices was the increase in natural gas cost between 2021 and 2022, the ISU report found. The price of natural gas, a vital component in most fertilizers, rose quickly in late 2021 because of low supply and high demand, the report said. This, in turn, caused some fertilizer producers to reduce their production, driving up prices. Sanctions and international pressure from China and Russia, leading fertilizer producers, also affected the global market.
Because of the bevy of pressures on the market, Hart said the researchers weren’t able to conclude that price gouging was happening, and more information would be needed to be sure.
Farmers are concerned about the high cost of fertilizer following the spring planting season.
While high crop prices have been able to keep net farm income high, Iowa Farm Bureau President Brent Johnson said if fertilizer prices don’t come down, many farmers won’t be able to break even.
“If the commodity markets continue to erode, the economics that farmers are going to experience is going to go red, and it could go red significantly if the grain markets fall,” he said.
Johnson, who farms in Calhoun County, said his dry fertilizer cost doubled and his nitrogen costs tripled between 2021 and 2022.
While the ISU study suggested prices could go down this year, that prediction is dependent on the price of natural gas dropping as well, Hart said. Johnson said he wasn’t confident farmers would see fertilizer costs drop.
Lance Lillibridge, president of the Iowa Corn Growers Association, said the results of the study were “disappointing” but “expected.” He said he’s still concerned about possible unfair market pressures around fertilizer.
“When companies get monopolistic — in other words when they start controlling 70 and 80 percent of a particular product — that’s problematic because it doesn’t allow competition,” he said.
The uncertainty in the market leaves farmers guessing as they plan for 2023. Lillibridge said farmers were unable to get fall and spring delivery prices for fertilizer, making it difficult to plan crop production for future seasons.
Both Johnson and Lillibridge said if costs remained high next year, farmers might plant fewer crops to save on fertilizer costs, which could pose challenges to the national food supply.
“All we can do is have different scenarios: If it's x, I do this, if it’s y, I do this,” Lillibridge said. “There's not a whole lot planning going on.”