Fertilizer costs are hurting farmers. Some think profiteering off Ukraine war just might have something to do with it

As it looks like the war in Ukraine has a reasonable chance of coming to a conclusion in the foreseeable future, American farmers are no doubt hoping for some relief when it comes to the cost of a major input, fertilizer. As farmers know, the global fertilizer market, which is heavily dependent on supplies from both Russia and Ukraine, experienced record highs when war broke out nearly four years ago. 

Why the squeeze?

Because fertilizer can account for anywhere from 23% (soybeans) to 35% (corn and wheat) of a farmer’s operating costs. Considering that the price of corn, which closed yesterday in Chicago at $4.45/bushel, is at price levels that were common, and even higher, 15-20 years ago, you can see the problem. Same goes for soybeans. Farmers are paying 2025 prices for fertilizer but are getting 2010 prices for their crops.

Though fertilizer prices have stabilized somewhat since they took off immediately after the 2022 Russian invasion of Ukraine, they are still substantially higher than they were before the war. 

Farmers are getting squeezed by fertilizer costs and some think there's something more than just the Russia-Ukraine war that has something to do with it. They’re thinking that monopolistic practices in the fertilizer industry are artificially running up prices and they’re demanding that somebody in Washington, D.C. do something about it. 

Last month at a Senate Judiciary hearing on the subject, Sen. Chuck Grassley (R-Iowa), blamed industry consolidation. At the same hearing, Sen. Cory Booker (D-N.J.), said “Congress must not just talk about the problems; we’ve got to fix them. Otherwise, American farming as we know it will be forever changed.” 

The industry’s response is to blame geo-political forces that drive supply-demand the world over and that prices are a reflection of that volatility.

I have trouble buying the industry explanation because these companies, during the early part of the Russian-Ukraine war in 2022, had huge leaps in earnings during the period 2020-2022. Industry profit margins for those years are off the charts. According to an NPR/PBS story: 

• Tampa-based Mosaic Co. made $3.6 billion, an increase of 438% from 2020

• Illinois-based CF Industries made $3.2 billion, an increase of 955%

• Canada-based Nutrien Co. made $7.7 billion, an increase of 1575%

A big part of the legislative reaction to all of this is an act introduced by Sen. Grassley titled The Fertilizer Research Act, which has bi-partisan support and is intended to research the supply-demand fundamentals of the fertilizer industry.  

Meantime, from the administration comes word that farmers will get an aid package within two weeks. As ever I support the notion of providing financial aid to our country’s cash-strapped farmers, who have a history of being financially-victimized by external forces they can’t control.  

The money would be welcome but, short term, it may aggravate the fertilizer issue by causing a surge in purchases by farmers using their new source of cash to buy that all-important input.

Best hope is that an end to the war in Ukraine will lead to normalized supply chains and farmers will be able to get what they need at prices that won’t wreck their balance sheets.

Another hope is that a congressional investigation with some teeth will shed some light on the possibility that corporate greed has something to do with this.

John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam. Republish with permission.

Photo: public domain, wikimedia commons

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