Farmers are paying more for the phosphate fertilizer they need as foreign and domestic producers fight for public opinion on whether the U.S. government should punish imports of the valuable crop production input with duties.
The Trump administration agreed to take on an investigation of the imports, but it will be the Biden administration that makes a final judgment on whether foreign-sourced fertilizer should be taxed to protect domestic producers of the product.
Meanwhile, the U.S. Commerce Department in November placed preliminary duties of 16.88% on imports out of Morocco by the OCP Group and preliminary duties of 21-72.5% on certain Russian imports.
While no final decision has been rendered — that isn’t expected to happen until April — producers on both sides of the argument, lawmakers, lobbyists and farm groups are weighing in heavily.
The Mosaic Company, the largest phosphate fertilizer producer in the U.S. and the firm that petitioned the Commerce Department for an investigation into imports from Morocco and Russia, argues that its very survival depends on curbing imports that are being unfairly subsidized.
“A lot of farmers will recognize that a consistent supply of American-produced crop nutrients is in their best interest, especially when you consider that we at Mosaic represent nearly half of the phosphate that gets applied in the U.S. every year,” says Ben Pratt, the senior vice president for government and public affairs at Mosaic. “Unfair competition from other players would effectively take us out of the market. The costs for farmers’ inputs down the road would be much higher.”
But prices for retailers and farmers have already gone up because of the U.S. investigation, says Kerry McNamara, the CEO of OCP North America, an OCP subsidiary of the Moroccan company that used to export about a million metric tons of phosphate yearly to the U.S.
OCP stopped shipping phosphate to the U.S. in June after the Trump administration accepted Mosaic’s petition for an investigation. That’s because OCP knew Mosaic was asking for duties of 100%, and that those duties were likely to be retroactive if they were imposed. It wasn’t a risk the company was willing to take.
OCP considered resuming sales in the U.S. after the preliminary duty of 16.88% was set in November, said one industry source who asked not to be named. But the company has already begun diversifying by selling to other markets, and that decision has been put off until there is more certainty in the U.S. market.
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The source noted that OCP will miss out on farmers booking their fertilizer for spring planting.
The U.S. imported about $730 million worth of phosphate fertilizer from Morocco and $300 million from Russia in 2019, according to the U.S. Department of Commerce.
It’s still too early to judge with any accuracy how big the impact of the duties will be on farmers, says American Farm Bureau Federation Senior Director Dave Salmonsen, but OCP says different. The company stopped shipping in late June, says McNamara, and that has pushed prices up about 26% for farmers.
“We think this is really unfortunate,” McNamara told Agri-Pulse. “We’re concerned about its impact on American farmers, who have told us clearly that they want and rely on diverse supplies and we’re happy to be a part of that. U.S. farmers have seen a significant rise in their costs — in prices of fertilizers — because of a lack of inputs from OCP. The last thing that farmers should have to worry about is a diminished fertilizer supply.”
But industry sources say the supply of phosphate in the U.S. is starting to fill the void left by Moroccan and Russian imports. Mosaic has decreased exports and imports have ramped up from Australia, Egypt and elsewhere, say industry sources.
Retailers have been opposed to Mosaic’s efforts to curb imports from the beginning of the process this summer.
“While ARA strongly supports the domestic fertilizer industry and policies that will make them more efficient and competitive globally, our primary interest is in achieving competitive sources of product from which our retailer and distributor members can best serve their growers,” Agricultural Retailers Association President and CEO Darren Coppock said in a statement. “We have consistently supported reducing both domestic and international trade barriers. Granting this petition will very likely limit fertilizer supply options for America’s farmers and ranchers and increase their input costs.”
And the Moroccan company has several U.S. lawmakers on its side. Sen. Jerry Moran, R-Kan., and seven of his GOP colleagues appealed to the Commerce Department and International Trade Commission.
“U.S. farmers depend on affordable phosphate fertilizers to produce a variety of crop, including corn, soybeans, cotton, wheat, sorghum, sugar beets and fruits and vegetables,” they wrote in August. “Phosphorous accounts for approximately 20% of fertilizer usage and 15% of total cash costs for producers. The imposition of duties … would result in higher input costs for U.S. farmers.”
But Mosaic's Pratt argues foreign-sourced competitors are not playing fair.
“Foreign governments are heavily subsidizing phosphate production in their countries so it can be sold at artificially low prices aimed at forcing other producers out of the market,” he said. “American farmers and consumers should not be reliant on foreign interests to provide this essential part of our food supply.”
Mosaic says that while it must own the land it takes mineral from for its fertilizer, the Moroccan government — which used to own OCP — allows the company “inexpensive access” to the minerals it needs. And in Russia, the government provides very cheap natural gas to producers and exporters there.
All of this, Pratt says, adds up to unfair government subsidies for its foreign competitors.
“Their cost of production is much lower than ours,” he said. “They can ship fertilizer to the United States and incur the cost of shipment and still be able to sell below market rates and be profitable. We’re not opposed to competing. We compete everywhere in the world we do business, but we need to compete on a level playing field in our home market.”
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