ISU study sheds light on fertilizer price spikes

Lynn Hicks, Chief of Staff, Office of the Attorney General, 515-281-6699;
John Crespi, Director, Center for Agricultural and Rural Development, 515-294-1699;
Ashlee Kieler, Communications Specialist, Office of the Attorney General, 515-281-6710;
Nathan Cook, Communications Specialist, Center for Agricultural and Rural Development, 515-294-3809;
Iowa Department of Justice Office of the Attorney General

June 22, 2022

DES MOINES – Fertilizer producers’ profits have soared over the last two years as farmers were hit hard by increased prices, according to a new study by Iowa State University and requested by Iowa Attorney General Tom Miller.

While crop prices have roughly doubled over the past couple of years, fertilizer prices are two to four times higher than they were in September 2020. Fertilizer producers have higher profit growth during the pandemic than many other food and agricultural industries, the analysis by ISU’s Center for Agricultural and Rural Development shows.

The report contains some promising news: “As supply chains improve, ports reopen, labor becomes more available, and energy prices ease, the expectation is that fertilizer prices will decline in the second half of 2022.” However, factors could prevent fertilizer prices from stabilizing in the short and longer term, including “natural gas demand and supply, changes in trade policy or economic sanctions, increased acreage demand by farmers, and potential market power in the fertilizer industry.”

The study says there is not enough evidence to determine whether fertilizer producers are using their market power to engage in “greedflation.” Whether “fertilizer firms may be taking advantage of inflation to raise prices . . . are good questions for which we need more data,” according to the report by agriculture economist John Crespi, director of CARD, and other five other ISU researchers.

Miller thanked ISU for undertaking the study. “This thorough report raises many good questions, which we will continue to explore," he said. "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.”

In February, Miller announced that his office would examine the unprecedented increases in fertilizer prices after the Iowa Corn Growers Association approached him with concerns. Miller began working with U.S. Agriculture Secretary Tom Vilsack and others, and he requested information from the five major fertilizer manufacturers: Mosaic, Nutrien, CF Industries, Koch Industries, and OCI N.V. (owner of Iowa Fertilizer Co.)

The ISU study shows that from 2018-19 to 2020-21, net income for fertilizer companies have increased fourfold in some cases. Bunge’s profits increased 415%, Mosaic’s 418%, and Nutrien’s 276%. However, the study noted that many fertilizer companies had negative returns in 2018-19.

The fertilizer companies have cited many reasons for the price increases, which the ISU study notes: decreased production due to COVID, natural gas production disruptions and price fluctuations, natural disasters affecting production and natural gas demand, and tight global supplies compounded by the Chinese ban on exports and sanctions on Russia and Belarus.