A Nitrogen Nightmare in the Making?

The American Farm Bureau is waving a red flag on a fertilizer fiasco that could drain U.S. farmers’ piggy banks.

The culprit? Potential duties on urea ammonium nitrate solutions (UAN).

In early July, CF Holdings, Inc. filed petitions with the U.S. government requesting countervailing and antidumping duty investigations of UAN imports from Russia and Trinidad and Tobago. The duties intend to offset the value of dumping — aka exporters selling in the U.S. at a below-normal value price — and countervailing subsidies.

CF Holdings, the U.S.’s largest UAN producer, claims the countries haven’t been fighting fair, underpricing their product by as much as 433.37%.

The more you know: More than 80% of American UAN fertilizer imports come from Russia and Trinidad and Tobago.

Bad news for the bottom line: Farm Bureau says UAN solutions are the most common nitrogen delivery vehicle, making up nearly half of nitrogen fertilizer usage. 59% of all fertilizer applied to fields is nitrogen. Roughly 25% of operating costs are attributable to UAN solutions… meaning these duties could do major damage to farmers’ bottom lines.

Insult to injury. Fertilizer costs were already projected to increase by roughly 5% between 2021 and 2022. The potential tariffs could make that a double-digit increase.

This Potash Is ‘Born in the USA’

Michigan Potash and Salt Co. (MPSC) in Evart, Michigan will harvest Borgen Bed (rock) 1.5 miles below the surface for the purest potash born in the USA.

What’s the big deal? Potash is a crucial fertilizer rich in potassium. The U.S. Department of the Interior added it to the critical mineral list in 2018 because it’s an essential commodity for our nation’s economy and food security.

Oh, and this… Today, 96% of potash for American farms is imported primarily from a combination of Canada, Russia, and Belarus.

Less dependence on foreign potash is key. “One of the world’s largest Canadian producers has materially reduced its supply while the pending sanctions on Belarus may further threaten the global food supply chain,” said Theodore Pagano, Founder and CEO of MPSC.

He continued, “Potash prices have doubled in the past year, putting pressure on American farmers and a spotlight on national food security.”

The MPSC site will be the first new potash plant in the U.S. in 30 years, and the largest in the country, providing 10% of our nation’s supply. Currently, the largest plants are in New Mexico and Utah.

Timeline: Construction on the MPSC plant is slated to begin this fall and will take three years, employing 300 union workers. Mineral rights have already been leased from 450 families.

When MPSC opens in 2024 it will employ 150 full-time employees, while producing 650,000 tons of potash and more than one million tons of food-grade salt. That’s a lot of salt shakers.

Mission to the Moon

Talk to a U.S. row crop farmer today and you’re bound to hear stories about rocketship rides.

But they won’t be talking about Elon Musk heading to Mars.

Skyrocketing fertilizer prices are front and center as producers execute their spring fertility plans.

Phosphate prices in the U.S. are nearing levels not seen since 2012. And anhydrous ammonia prices have almost doubled since last fall, topping $600 per ton in some areas.

The Liftoff: Boosted by higher crop prices and mild weather, farmers spent extra cash on fertilizer applications in the fall, burning through much of the inventory retailers had on hand. Throw in production disruptions from the arctic blast in February and suppliers have been left with one plan: strap fertilizer prices to the nearest starship and send them skyward in hopes of slowing demand.

And current global dynamics are adding extra rocket fuel.

Shuttered phosphate imports from Morocco and Russia plus China’s energy problems and slowing output haven’t helped.

To Infinity and Beyond? Forecasts moving forward are a bit mixed, but most agree the higher prices are likely to stick around for most of 2021. Mother Nature is primed for an early planting season which would mean continued pressure on supply and no production window to catch up.

The New Nitrogen Era

The name of the game is nitrogen, and markets are keeping a close watch on 2021’s expected fertilizer frenzy.

In North America, improving farm economics, increased canola planting, and steady corn acres will keep demand strong.

But let’s go global:

  • India: Favorable weather in the region equals a projected buying spree that global markets like to see.
  • Brazil: A lack of domestic urea and better farm incomes will make South America a hot spot for sales.

 


Nitrogen’s biggest input – energy from natural gas or coal – is seeing climbing prices that factor into the other side of that demand equation: supply. With a rising cost curve among producers in regions like Europe and Asia, there’s a chance global nitrogen output could fall.

And you know what they say about opportunity and overalls…

There’s a lot of hard work being done by startups to rethink nitrogen usage, stabilization, and retention.

One example: Sound Agriculture. Their nutrient efficiency product, SOURCE, is newly available to corn and soybean producers. Touted to save 25-50 lbs of nitrogen/acre for by unlocking previously unavailable forms of nitrogen, it’s the new kid on the block of reducing dependence on the fertilizer.

The Phosphate Fiasco Ramps Up

An international fight over fertilizer is making waves.

The backstory: In July, U.S. fertilizer giant Mosaic Co. petitioned to the Department of Commerce that something hairy was going on in Russia and Morocco with phosphate prices. A glut of cheap, imported phosphate knocked domestic prices heavily over the past year. Even Nutrien, the world leader in fertilizer production, took an impairment charge on its earnings as the outlook on prices was ‘less than favorable.’

So Commerce folks obliged. Initial duties on Russian and Moroccan phosphate providers ranged from 20% to 72% — a bold move as 76% of phosphate imports were funneled from the two countries.

But the tides have turned: Noting Mosaic’s control of 70% of the U.S. phosphate market, the international foes are highlighting how a major lack of competition is not good for farmers.

Their campaign slogan: Mosaic’s getting greedy.

The North American wing of global fertilizer-maker OCP S.A. [Morocco-based] launched StandWithUSFarmers.com to gain signatures to send to Congress to fight the petition. The site advocates that U.S. producers have already seen a 25% spike in fertilizer costs since imports tumbled.

By the numbers: A former Chief Economist to American Farm Bureau did the math to show that U.S. farmers will see an additional $480-$640 million in fertilizer bills with duties in place.  Eight Corn Belt Senators took note and are now pushing for the Mosaic petition to be trashed.

Where this goes: The Commerce Department is weighing a clash of interests. Do they ‘un-duty’ phosphate imports and avoid a Mosaic monopoly? Or do they investigate Mosaic’s claims further to gauge unfair international subsidies? This will be a barn burner.