Transnational fertilizer companies, many based in North America, are reporting record profits despite increased production costs and reduced sales of their products. The high fertilizer costs are drawing attention, not just here in Canada but also globally, and there are warnings that these costs could trigger a food crisis in parts of the world similar to that which occurred in 2007-2008.
Given that sales are down and production costs up, some food and farm organizations are wondering if these prices are being fixed artificially high because of corporate concentration and lack of competition in the sector.
Farm organizations across North America and as well as global non-profit organizations which monitor food security issues are among those sounding the alarm— tagging the windfall profits of the major fertilizer companies as possible collusion — and asking national governments to investigate these huge gains. These profits come at a time when farmers’ crop incomes are improving. Coincidence? Perhaps, say some, but investigating might find otherwise.
In Canada, farmers this year have been paying increases of anywhere from double to more than 250 per cent over the five-year price average for fertilizers.
But, the National Farmers Union (NFU) emphasizes that lack of competition makes the potential for manipulative pricing behaviour that much easier. The NFU notes in a letter written to the House of Commons Agriculture Committee that:
“…These four corporations control 95 per cent of Canadian ammonia production capacity and 100 per cent of urea capacity. On a North American basis, these same four companies control 74 per cent of ammonia capacity and 84 per cent for urea.”
While demand is down for these fertilizers, and production costs have increased, profits for some fertilizer companies have at least doubled in the first half of 2022 compared to 2021.
Consider the recent profit picture for some of the companies that dominate the nitrogen fertilizer market in Canada: Nutrien Ltd. reported net earnings of $5 billion for the first half of 2022, double amounts for the same period in 2021; CF Industries and Yara International also reported net earnings that doubled during the first half of 2022 compared to 2021.
The NFU is calling on the House of Commons Agriculture Committee to “immediately undertake a thorough review of fertilizer pricing, the structure of the sector, and the conduct of its largest corporations.” In its August letter to the Committee, and to provincial ministers of agriculture, the NFU notes that record profits are being observed for all three primary fertilizer types: nitrogen, phosphorus, and potassium. The NFU requested an investigation earlier this year as well.
Canadian farmers are not alone in bearing the brunt of increasing fertilizer prices. Farmers in the United States are also requesting that their government investigate potential price-fixing of fertilizer prices there as well. They note that the fertilizer corporations financial records state clearly that these record profits come at a time of increased production costs and reduced sales.
More than 24 food, farm and rural organizations have come together with Farm Action in the United States to write to the US Department of Agriculture asking for action, noting that the fertilizer companies’ pricing systems are robbing farmers of their profits. The group is asking for the USDA to take action to decentralize the production and market control of the fertilizer corporations.
The situation globally regarding fertilizer prices and corporate concentration in this sector is very similar. Over the past 70 years, since the end of the Second World War, the use of artificial fertilizer to boost crop production has increased to the point that, today, more than 50 per cent of global agricultural production is dependent on these artificial nitrogen and other fertilizers.
Since the 2000s there have been several buyouts and mergers in this sector, consolidating the fertilizer production industry into a handful of transnationals, namely Nutrien (based in Canada), Mosaic (US), Yara (Norway), CF Industries (US), and K+S (Germany). The industrialization of agriculture across much of the globe has created a dependency on inputs which farmers are told will boost their crop yields. It has also increased farm production costs, and can eat into farm profits, as is noted this year with unprecedented fertilizer prices alongside windfall profits.
The situation is once again reaching crisis proportions — with fertilizer prices impacting food security in a number of ways. Increased fertilizer prices in Canada will affect farm incomes on those farms which have become dependent on artificial fertilizer use. In Africa, small landholders who have become dependent on fertilizer use hoping for better crop yields can find themselves unable to pay the higher input costs. Increased fertilizer costs increase food costs.
In the end it is the farmer, the consumer and the taxpayer that foot the bill for increased agricultural production costs. In some cases, as in Canada, it can be through increased federal and provincial program supports. Consumers pay more at the store… Or line-up at the food banks when they can’t. In other parts of the world, people foot the bill through hunger — as was the case in 2007 and 2008.
And if all of this was not enough, the legacy of dependence on artificial fertilizers goes beyond windfall profits — and seeps right through to destructive practices at the community level. Use of artificial fertilizers produced with fossil fuels is driving agriculture’s contributions to greenhouse gases emissions and climate change.
But this dependence and its impacts, and whether the price is worth the benefit…is grist for another column — an important story for another day.