Higher Fertilizer Prices Could Be Coming – Why Should CAD Members Care?

The United States International Trade Commission (ITC) recently determined that there is a reasonable indication that imports of urea ammonium nitrate (UAN) from Russia and Trinidad and Tobago materially injure the UAN industry in the U.S. and are allegedly subsidized and sold in the United States at less than fair value.

The investigation is being conducted in response to petitions filed by CF Industries Holdings, Inc., and its subsidiaries, Terra Nitrogen, Limited Partnership, and Terra International. Under U.S. trade laws, a finding of injury to the domestic industry is a prerequisite for imposing antidumping and countervailing duties.

In 2018, Russia exported 1,227,252 tons of UAN for a value of $186,097,918. In 2020, they exported just slightly less to the United States at 1,186,295 tons, but the value was at $137,784,739.

In an August Farm Futures’ Magazine reader survey, over 92% of respondents anticipate higher nitrogen prices next year. Growers expect the biggest price increase to be seen in phosphate fertilizers as trade flows continue to adjust to the countervailing tariffs dispute between the U.S., Russia and Morocco.

In July, the Department of Commerce announced the initiation of antidumping duty and countervailing duty investigations of UAN from Russia and Trinidad and Tobago. As a result of the ITC’s affirmative determinations, the U.S. Department of Commerce will continue its investigations of imports of UAN solutions from these countries, with its preliminary countervailing duty determinations due on or around September 23, 2021, and its antidumping duty determinations due on or around December 7, 2021.

If both agencies make affirmative final determinations – which typically takes approximately one year – then the U.S. Department of Commerce will issue antidumping and countervailing duty orders on UAN, which will remain in place for at least five years. 

According to a recent Market Intel report from the American Farm Bureau Federation, Economist Veronica Nigh reports that given that UAN solutions account for 43% of nitrogen fertilizers, and nitrogen accounts for 59% of total fertilizer use, this means about 25% of operating costs can be attributed to UAN solutions. “Certainly, farmers would feel a significant increase in UAN solution costs in their bottom line,” says Nigh. “Russia and Trinidad and Tobago combined account for approximately 81% of UAN fertilizer imports. If the proposed anti-dumping margins drive UAN fertilizer costs up, production costs will rise accordingly for U.S. farmers who grow corn, soybeans, cotton, wheat and other crops for the next planting season and beyond.”

Nigh explains over the last several years, fertilizer prices have risen considerably for all U.S. major field crops. “If realized, this would mean that between 2018 and 2022, fertilizer prices will have increased by double digits for every major field crop in the U.S.”

“The preliminary ITC decision is an important step towards leveling the playing field for UAN producers in the U.S. and their workers,” says Tony Will, President and Chief Executive Officer, CF Industries Holdings, Inc. “CF Industries will continue participating actively in the ongoing investigations in order to restore fairness to our highly competitive industry and ensure that American UAN producers remain a reliable source of fertilizers for American farmers for years to come.”

EDITOR’S TAKE:

What a catch-22 for U.S. crop producers! On one hand, they want fair trade. If our trading partners are not playing by the rules then that is not a level playing field. On the other hand, U.S. farmers benefit from lower prices if exporting nations are willing to subsidize their products like UAN fertilizer. That said, the practice of shipping low-priced fertilizer to the U.S., at the expense of U.S. fertilizer companies, has been on-going for decades. Now is the time to fix the problem.

As a side note, farmers are already beginning to ask if they can “pre-pay” for their 2022 fertilizer needs. Unfortunately, ag retailers are not able to give them a firm price at this point in time.

Now is also the time for all CAD members to emphasize the products and companies associated with AgPack. A perfect example – if someone purchases or leases a truck from a CAD member, one of the AgPack incentives is $2,000 toward the purchase of crop nutrition* from AgroLiquid, PLUS an annual soil test and crop nutrient management consultation with an AgroLiquid agronomist and/or Sales Account Manager. Hopefully you will immediately recognize this as a prime opportunity to promote one of your greatest advantages over any non-CAD truck dealer - AgPack!