Barges full of Moroccan phosphate that arrive in New Orleans are still moving up the Mississippi River, but that fertilizer isn’t for U.S. farmers. Countervailing duties the U.S. slapped on Moroccan phosphate giant OCP last year make that impossible, so the much-needed farm input is going to Canada.
But OCP, one of the largest global players in phosphate fertilizer, is laying the groundwork to recapture lost U.S. market share. Strong demand, coupled with high U.S. prices, farmer desperation and Capitol Hill outrage are all part of the game plan.
“Even though we’re temporarily out of the U.S. market because of these duties, we’re still here and we’re not going anywhere,” OCP North America CEO Kerry McNamara tells Agri-Pulse.
That’s why OCP is appealing to the U.S. Court of International Trade the decisions by the International Trade Commission and the Commerce Department that ruled in favor of the U.S.-based fertilizer company Mosaic, resulting in a nearly 20% duty on Moroccan phosphate fertilizer.
The eventual key to success for OCP, according to McNamara and Kevin Kim, OCP North America’s chief growth officer, is the fact that the economic environment for U.S. farmers and the supply situation for fertilizers is much different now than it was two years ago when the ITC agreed to look into claims that imports were squeezing out domestic production.
Minnesota-based Mosaic – the largest domestic producer of monoammonium phosphate (MAP) and diammonium phosphate (DAP) – petitioned the Commerce Department on June 26, 2020, to investigate its allegations that subsidized product from Morocco and Russia had been undercutting its U.S. sales for the previous three years.
Commerce and the ITC took on the case and eventually agreed with Mosaic. Prices for phosphate fertilizer fell between 2017 and 2020, and the market was oversupplied at a time when demand was weak, according to a study conducted by ITC.
The situation is far different now.
Fertilizer prices in the U.S. doubled between the summer of 2020 and the start of 2022, according to Aaron Smith, an economics professor at the University of California, Davis.
It was in the middle of 2020 when OCP, spooked by preliminary rulings in the ITC case, stopped exporting phosphate fertilizer to the U.S. OCP had been shipping 730,000 tons of the fertilizer yearly to the U.S. Crop prices were rising, farmers were using more fertilizer, and the impacts of domestic production and supply disruptions were weighing more heavily on the market.
By Oct. 1, 2021 – just five months after the final ruling by ITC – the national average price for DAP hit $722 per ton, a 44% increase from January. Last month, USDA’s Agricultural Marketing Service issued a report that put the average price in Illinois of DAP at $860 per ton and MAP at $881.
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Russia announced earlier this month that it halted all fertilizer exports, and while Russian suppliers are not exporting to the U.S. because of the duties, the absence of those inputs on the world markets is expected to push global prices higher and in turn push up costs for U.S. farmers.
The fact that farmers are now paying much higher prices for fertilizer isn’t expected to sway the judges at the Court of International Trade, says McNamara. But it could affect the Commerce Department if OCP can convince the judges hearing their appeals to recognize mistakes made by Commerce and ITC.
OCP is leading two separate appeals at the U.S. Court of International Trade – one to contest the ITC’s decision that imports injured the domestic fertilizer industry and one challenging Commerce’s calculation of the duty level.
“Technically speaking, the appeals only consider facts that were before both the agencies when they made their decisions, but that’s fine with us,” said McNamara. “We didn’t push in product and push down prices or hurt anyone.”
The judge presiding over the appeal is Stephen Vaden, who grew up on his family’s farm in Tennessee and served as USDA's general counsel during the Trump administration.
If the U.S. Court of International Trade judges agree that changes need to be made to the duties, that would put the issue back in the hands of Commerce and ITC at a time when lawmakers and farm groups are demanding that duties be repealed.
“It was a completely different world then when (Mosaic) first filed that petition,” National Corn Growers Association President Chris Edgington tells Agri-Pulse. “You would think that if that case had been filed six months ago and they were still in the middle of the preliminary stage, there would be some different decisions rendered.”
That is the kind of logic that McNamara and Kim say they are hoping Commerce and ITC will be forced to look at if the appeals court sends the phosphate issue back to the agencies for reexamination.
And lawmakers are already pouring on the pressure.
“The duties on phosphate fertilizer products imported from Morocco should be reconsidered,” House members and senators told the ITC in a letter last week. “Imports currently supply about one-third of all domestic phosphate fertilizer, and Morocco has been a long-time supplier to U.S. farmers … Historically, phosphate fertilizer accounts for 15% of total cash costs for producers. Since the U.S. Department of Commerce’s decision to impose duties on phosphate fertilizer imports from Morocco, phosphate fertilizer prices have increased 93%.”
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