Last month, 90 members of Congress sent a letter to the chair of the U.S. International Trade Commission (USITC) requesting suspension of the countervailing duties on phosphates from Morocco to help ease fertilizer prices for American farmers. These duties were imposed in March 2021 when the USITC ruled that fertilizer imports from Morocco and Russia were receiving illegal subsidies that were hurting the U.S. fertilizer industry. Farmers know the rest of the story—since the duties took effect, prices of phosphates have increased over 300% to record levels (See Figure 1). While inflation, China’s recent export ban, and other supply chain issues may be putting additional strain on the fertilizer industry, the USITC tariffs are certainly not helping.
The USITC is not stuck between a (phosphate) rock and a hard place on this issue. The U.S. is the third largest phosphate producer in the world, behind China and Morocco. The Mosaic Company—the largest U.S. producer—was the original petitioner requesting the USITC to investigate Moroccan and Russian imports. After a recent acquisition of CF Industries’ phosphate mines in Florida, Mosaic’s market share was recently estimated at around 74% of the U.S. market. And, instead of being crowded out of the market by foreign competitors, Mosaic exports around half of its annual production, mostly to Canada and Mexico. In fact, Mosaic’s own statements suggest that it does not need tariff protection. Larry Stranhoener, former CFO of Mosaic, said in an interview in 2013, “[fertilizer] is a product that is freely traded and frequently traded across borders, so regional market share data should not matter.”
We agree with Mr. Stranhoener. The U.S. fertilizer industry will be fine if the USITC removes these duties. Doing so would alleviate at least some of the strain on U.S. fertilizer prices. On top of ongoing energy and food inflation pressure, global supply chain failures, and the ongoing agri-food consequences of the Russian invasion of Ukraine, U.S. farmers and consumers should not have to bear the costs of geopolitical posturing in the fertilizer market.
Figure 1. Phosphate rock and diammonium phosphate (DAP) and triple superphosphate (TSP) prices ($/MT): January 2017 – December 2021