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USDA Fertilizer Competition Comments

Letters

Submitted via

June 15, 2022

Ms. Jaina Nian
Agricultural Marketing Service
U.S. Department of Agriculture
Room 2055-S, STOP 0201
1400 Independence Avenue, S.W.
Washington, DC 20250

Attention: Docket # AMS-AMS-22-0027

Dear Ms. Nian: Thank you for this opportunity to provide feedback to the U.S. Department of Agriculture (USDA) on access to fertilizer and related supply chain concerns, docket number AMS-AMS-22-0027, Federal Register page 15191, submitted March 17, 2022. Since 1929, NCFC has been the voice of America’s farmer-owned cooperatives. NCFC members include regional and national cooperatives, which in turn consist of nearly 2,000 local farmer cooperatives located around the country. Farmer cooperatives – businesses owned, governed, and controlled by farmers and ranchers – are an important part of the success of America’s agricultural supply chain. NCFC has an extremely diverse membership – our members span the country, supply nearly every agricultural input imaginable, drive innovation, develop new technologies, provide credit and related financial services, and market a wide range of commodities and value-added products. The contributions of farmer co-ops benefit the entire food and agriculture supply chain from the farm gate to the grocery store aisle.   NCFC membership includes:
  • Marketing cooperatives – which handle, process and market virtually every commodity grown and produced in the United States.
  • Bargaining cooperatives – which bargain to help their farmer members obtain reasonable prices for the commodities they produce.
  • Farm supply cooperatives – which are engaged in the manufacture, sale and/or distribution of farm supplies and inputs such as fertilizer, as well as energy-related products, including ethanol and biodiesel.
  • Credit cooperatives – which include the banks and associations of the cooperative Farm Credit System, and which provide a competitive source of credit and other financial services, including export financing, farmers, and their cooperatives.
Farmer cooperatives are essential to the success of America’s farmers and provide essential access to the availability of fertilizer. We offer the following responses to the questions posed in the Notice, along with some additional comments we hope are helpful as you develop creative solutions to this challenge.  We would also like to offer the comments of Land O’Lakes, a member of NCFC.  See Appendix A.

Question #1: Please describe challenges and concerns with market concentration and power in the fertilizer industries, including the extent of control by any firms over farmers’ and business’ access to fertilizer, pricing, availability, transportation and delivery, quality, and any other contract terms or other factors. Please describe how these challenges have developed or evolved over time, and any details on geographic or other divergences within various regions of the United States or between the United States and international markets for fertilizer.

Answer: While there are relatively few manufacturers in local markets, there are many options for fertilizer supply around the world. Accessing those supplies is a simple equation of product and transportation costs to each destination. Each market has its unique nuances. Some markets benefit from local production, large private storage facilities, access to beneficial freight channels, or more competitive international supply chains.

Fertilizer availability and costs have also been impacted by U.S. antidumping/countervailing duties (e.g., phosphates and UAN), Section 301 tariffs, and Chinese export restrictions.  These measures cause global trade flows to shift, increasing costs for businesses and farmers. Additional trade restrictive measures would further exacerbate supply and cost issues. In addition, transportation unions (railroads, stevedores, etc.) ability to hold up product movement through supply chains during the most critical time (before or during the season) remains a concern. Fortunately, the Canadian Pacific Railway was able to reach a compromise with its union right before the planting season started this year, which otherwise would have significant negative impacts on the availability of inputs. 

Question #2: Please comment on both long and short-term trends in fertilizer prices. What role have fertilizer, crop prices, or availability of key raw materials and manufacturing played in any changes? Has price volatility increased and if so, what accounts for this increase in volatility? Please comment on any trends and the relationship of fertilizer prices to prices of relevant crops, such as corn and soybeans.

Answer: Fertilizer is a bulk commodity product and as such trades based on both global and local supply and demand balances. Production is ratable across the year, but periods of consumption are highly seasonal and subject to weather risk and demand destruction. Any period that leads to supply and demand getting out of balance can result in volatility, which can translate to either higher or lower prices.  

There are other factors that also contribute to fertilizer prices – logistical challenges/costs, other input costs, and availability of raw materials, to name a few. Meanwhile, crop prices continue to have a substantial effect on farmers’ purchasing decisions, but fertilizer purchases are influenced by many factors and not just price.

Question #3:  Please share your views on whether the existing fertilizer market is sufficiently competitive. If you believe it is not, how do competition problems manifest themselves? For example, is there evidence of collusion, market manipulation, or other anticompetitive practices among competitors, buyers of farm products, commodity traders or related financial firms to fix or alter prices, allocate markets, or restrict from where a farmer buys inputs and sells product? Is there evidence of private or public communications by fertilizer companies relating to price, output or supply that appear to go beyond those necessary to communicate important information to customers?

Answer: Consolidation has occurred, but much of this has been driven by periods of struggle for fertilizer manufacturers trying to survive the volatile factors that influence their businesses: input cost, logistics constraints, environmental regulation, capital requirements, shareholder influence, etc. Fertilizer marketers are typically comfortable marketing available supply that has been produced; they know their cost to make and move these products and what margin is available in any transaction. When marketers commit to a price and availability for supply that has not been produced and may not be produced for three, six, or nine months in advance there are myriad unknowns and risks.

In addition, planning more production capacity will not have an immediate impact on supply, as it takes time to bring new production online.  And it is not without risk as the new capacity becomes permanent, potentially resulting in excessive production capacity during an inevitable downturn in demand.  Unfettered access to international supplies helps act as a buffer to balance supplies – making products available in times of increased demand while not contributing to potential excessive capacity during a downturn.  However, there are a number of factors currently distorting and inhibiting trade in fertilizer, as noted elsewhere.

Question #4:  What effect have these mergers had on a merged firm’s market power and the ability to squeeze farmers or squeeze out competitors? Are there indications that firms have made it harder for new fertilizer firms to start up and grow? Is there evidence that firms have controlled or reduced supply to keep supply low and prices high? Have certain mergers allowed the acquisition of technologies or businesses that produce, transport, or retail fertilizer that competitors rely on, with the effect of lessening competition? Is there evidence of merged firms using their market power to price below cost or run losses in certain segments to undercut competitors or potential new market entrants?

Answer: Mergers have helped balance supply and demand from a macro perspective. One example matched a company without sufficient storage assets facing constant threats of production curtailments with another entity with surplus storage. The net effect of that union was more stability for the merged entity. It is logical that each independent company evaluated adding storage and production assets pre-merger to balance their own systems, but economics proved more supportive to merge. Fertilizer production and marketing requires significant capital, which typically serves as the barrier to entry for most. In addition, fertilizer demand occurs in very narrow windows. This type of concentrated demand makes it difficult for an agriculture retailer to achieve balanced supply and demand planning, including from multiple suppliers. As a result, market participants may overbuild or over purchase to manage the seasonal surge in demand, which can adversely impact return on investment.

Question #5: What role do contractual or sales practices in fertilizer play with regard to producer access or prices paid to fertilizer? Have contractual or sales practices changed recently, or over time? Has the duration of these contracts changed over time and if so, how? Do some contracts require farmers to buy or use fertilizer from one supplier? Is there evidence of fertilizer companies preferentially pricing products differently for some farmers or dealers and not others? To what extent and in what ways do buyers of farm products influence farmers’ use of fertilizer?

Answer: Contracts are used to reduce risk by defining mutual expectations for all parties: producers, distributors, retailers, and growers. Entities often offer various contracting or purchasing options that tend to correlate to the underlying risk for the parties involved. The most lenient contracts might include no firm commitments for either price or supply from either party. The most complete contracts define all aspects of the transaction including product, origin, destination, price, volume, payment terms, ship period, and penalties for non-performance on either side. Like many things, buyers and sellers tend to favor opposite extremes considering their unique vantage points and market outlooks.

Question #6: Please describe any requirements or inducements to bundle a main product (fertilizer) with another product or service, and any impacts on competition. For instance, does such a practice induce a farmer’s lock-in or allow the firm offering the main product (fertilizer) with the secondary product (e.g., pest management chemical or seed) to exclude competitors from offering the second product? What impacts do any of the contractual requirements listed above or any other contractual or sales practices have on competition?

Answer:  We are not aware of any examples of this practice within the farmer cooperative sector. Custom application services may be offered to blend, ship, and apply products for customers without the specialized equipment required.

Question #7: How do transportation and delivery affect fertilizer competition and access to fertilizer? For instance, the U.S. receives imports of fertilizer derivatives through the Gulf of Mexico, and ships fertilizer product up the Mississippi River. To what extent does market power by fertilizer or applicable firms over these or other key transportation channels affect competition and farmer’s access to fertilizer? What risks relating to supply chain, labor or other disruptions are most relevant?

Answer: Agricultural cooperatives have invested substantial sums to create additional storage capacity for fertilizer products and refine the logistics operation needed to move that fertilizer efficiently across the mode(s) of transportation. Competitive, efficient, and accessible transportation resources play a critical role in establishing the competitive delivered costs of inputs and outputs to the end user’s destination.

U.S. ports and rivers provide competitive transportation opportunities for bulk commodities like fertilizer. Terminals on our nation’s coasts and inland river systems provide opportunities for efficiently delivered fertilizer that helps competitive pricing of fertilizer products. Congress needs to continue funding waterway infrastructure to improve port backlogs and modernize the lock system on the Mississippi and Illinois Rivers to 1200 feet. Some of the locks are well past their engineered design life, too small for a modern 15 barge tow, and the result is bulk fertilizers delivered inland by waterways and grain going back down the river costs more due to higher transportation costs and are less competitive in a global market. We recommend the administration provide support for upgrading locks and dams and support congressional efforts to enact Water Resources Development Act (WRDA) bills every two years. Additionally, the Army Corps of Engineers should avoid scheduling lock closures during peak times for agricultural product movements. These closures must be communicated to the agricultural industry well in advance of this scheduled work to provide ample time to plan and adapt. In addition, West Coast ports suffer from outdated infrastructure and from environmental regulations that limit the ability to make improvements. Without state-of-the-art ports, farmers and ranchers are not able to fully benefit from trade agreements and incur significant supply chain challenges. We seek to work with you to find solutions to better balance the needs of shipping lines with the needs of our agricultural exports. To promote exports, U.S. policy must include these overdue infrastructure investments to facilitate efficient movement of U.S. agricultural products both domestically and internationally.  A focus should be on prioritizing movements of agricultural products given the importance of food security worldwide. Equally critical to improving transportation infrastructure will be creating a real-time scheduling and data sharing system, as well as advancing workforce training and recruitment.

Trucking & Driver Shortages

Efficient and timely trucking resources are also essential to the delivery of fertilizer. Exemptions to hours-of-service (HOS) rules for truck drivers provide needed flexibility. Given the strong safety record of the U.S. agricultural trucking sector, Congress and the Federal Motor Carrier Safety Administration (FMCSA) periodically have modified policies to enhance its usefulness to help ensure a more efficient and cost-effective freight transportation distribution system. We urge four more important incremental changes to the agricultural exemption to the HOS rules [C.F.R. 49, sec. 395.1(k)] to help meet seasonal spikes in the transportation of fertilizer. First, we recommend eliminating the “planting and harvesting periods” requirements to ensure uniformity within all states. Most states already have adopted a year-round agricultural exemption (Jan. 1 – Dec. 31) given the diverse range of crops and modern agricultural practices that result in truck movements throughout the year. Second, we urge providing a 150-air-miles exemption from HOS regulations on the backend of truck movements for those transporting agricultural commodities. This would build on the current exemption for the beginning of hauls at the “source” and simply would add the term “destination.” Originally, the front-end exemption was put in place to give farmers and ranchers extra time to navigate rural roads safely and slowly, which frequently are minimally maintained and have significantly slower travel speeds. This change also would avoid penalizing drivers for doing their job safely in remote areas away from major highways.    Third, we request the inclusion of an FMCSA pilot program for transporters of farm supplies to operate under an expanded air-mile radius where the agency can collect data from participating agribusinesses over a multi-year period to confirm there are no adverse impacts on transportation safety. Farm supply transporters continue to be disadvantaged by industry consolidation and driver shortages. Supply chains for agriculture businesses need to move more fertilizer in a short amount of time and in higher volumes. However, trucking demand is outpacing the supply of available drivers. In fact, industry statistics indicate 25–30 percent more truckers are needed to meet demand in all sectors of the economy. Federal commercial driving license (CDL) restrictions on drivers aged 18 to 20 create an obstacle to recruiting a new generation of drivers. Forty-nine states and the District of Columbia allow 18- to 20-year-old CDL holders to operate in intrastate commerce. We request your support of pathways for CDL holders aged 18-20 to drive on the Interstate Highway System and drive across state lines to help remove the constraint posed by this obstacle to recruiting drivers. The FMCSA’s proposed pilot project to allow drivers 18-20 years old to operate commercial motor vehicles in interstate commerce contains many concepts from the DRIVE SAFE Act to increase safety. We encourage FMCSA to continue the pilot. Allowing more efficient loads would increase efficiency, reduce costs, and produce fewer emissions with fewer trucks. Increasing load allowances by 5–10 percent would be a significant improvement. Further, we recommend harmonization of state road and interstate highway system truck weight limits. Lower Interstate Highway System truck weights compared to state road truck weight limits reduce economic and environmental efficiency. We believe the solution is to give states flexibility to increase and harmonize the maximum gross vehicle weight for trucks on the Interstate Highway System in their jurisdictions, depending upon current state highway limitations. In March 2020, Congress provided states with the option to determine truck weight limits through Section 22003 of the “Coronavirus Aid Relief, and Economic Security Act” (CARES Act). We are aware that approximately 20 states utilized the emergency authority to increase and harmonize truck weight limits for state and Interstate Highways within their jurisdictions. We respectfully request your support to provide states with the flexibility to increase and harmonize the maximum gross vehicle weight for trucks on the Interstate Highway System in their jurisdictions in a way that is compatible with their current state highway limitations. Additionally, the Administration should modernize weight restrictions for 6-axle trucks by taking emergency actions that allow federal gross vehicle weight limits to exceed 80,000 pounds on a temporary basis. This would make U.S. farmers and businesses more competitive and reduce the number of trucks needed to haul the same amount of goods. The U.S. Department of Transportation (DOT) implementing this change would reduce infrastructure wear-and-tear, enhance capacity, and benefit the environment by reducing vehicle miles traveled. It would also mitigate the current driver shortage which is particularly pronounced in rural agricultural areas. This could be achieved via a federal emergency declaration under the Stafford Act.

Rail

While rapid consolidation has caused a significant decline in freight transportation by rail, it remains an important mode for transporting fertilizer. Today, four railroads haul more than 90 percent of all rail freight, with duopolies existing in the East (CSX and Norfolk Southern) and the West (BNSF and the Union Pacific). Further, six of the seven Class I U.S. freight railroads (the largest carriers) have implemented a form of the so-called precision-scheduled railroad operating model, which at its core involves dramatic reductions in operating expenditures. This results in furloughing crews, downsizing customer service personnel, and idling locomotives. Many fertilizer plants are built on a single rail line and are land locked away from inland waterway access. This dependence on a single primary mode of transport can cause service and price issues when the performance of that single mode is compromised, such as has been seen this spring with railroad labor disputes. While we believe it is important for railroads to earn sufficient revenues to invest in their networks and earn reasonable profits, the balance has shifted to the point that carriers are increasingly and arbitrarily dictating the terms and conditions under which they will provide service to our sector. Many facilities are captive to a single railroad and in some cases, railroads have “demarketed” traffic by either increasing rates or imposing service conditions that make rail infeasible for shippers and receivers. This has major supply chain implications when we operate in a just-in-time delivery system. In response to these and other developments associated with railroads exercising their overwhelming market power, the Surface Transportation Board (STB) – the independent federal agency responsible for providing regulatory oversight of freight rail practices – has initiated significant efforts to better balance the needs of railroads to earn revenues with the need for rail customers to have access to cost-effective and reliable rail service.  It is critical that the STB provide meaningful regulatory oversight and serve as a neutral body to settle rail marketplace disputes. Continuing efforts to modernize this critical agency under the Biden administration will help farmers, agribusinesses and manufacturers be more viable and competitive while still preserving a vibrant and profitable rail industry. We applaud USDA’s engagement with the STB in that regard. USDA should continue to work with the STB and DOT to enact rail reforms and oversight that will provide service levels to ensure the continued movement of agricultural and food commodities for both domestic and international uses related to human and animal feed and biofuels. The STB should pursue regulatory reforms that promote rail competition, fair rail rates and demurrage practices, and reliable service. Additional reforms in the areas of rate regulation, reciprocal switching, and demurrage and accessorial fees can also promote more competitive rail service, make goods more affordable and boost the economy.

Question #8: Please comment on the U.S. agricultural system’s reliance on foreign supply of some fertilizers and global supply chain risks that could result from trade disruptions. Please comment on how the conflict in Ukraine may be impacting fertilizer markets. If other supply chain or trade disruptions have been experienced, please describe the effects and challenges in dealing with such events. Would greater availability of domestic or North American options mitigate risks? Would reducing dependence on suppliers from any one country or region mitigate risks? What tools might be deployed to achieve those ends?

Answer: Recent world events have reminded many in agriculture that some critical and essential inputs (like fertilizer) are exclusively or dominantly sourced from nations that are unstable or unfriendly. The global movement of fertilizer has made a seismic shift with respect to sourcing, application, and innovation, and is being redefined from “just in time efficiency” to reliable and resilient.

The U.S. is nearly self-sufficient on nitrogen supply and could be fully independent if economics supported the investments. Natural gas is the primary feedstock for all nitrogen-based fertilizers and accounts for 70 to 90 percent of manufacturing costs at a nitrogen facility. According to The Fertilizer Institute, between 1999-2008, high natural gas costs forced domestic ammonia producers to close 27 of 42 production facilities, cutting our production capacity in half and making U.S. farmers more reliant on imports. The changes around natural gas fracking alleviated the input cost dynamic that previously challenged domestic nitrogen production economics, but an extended period of elevated costs and lack of infrastructure investments could threaten the viability of domestic production. Additionally, the U.S. government must recognize that there is a balance between shipping U.S. liquefied natural gas to support Europe as it diversifies its energy supply away from Russia and ensuring adequate supplies of natural gas availability within the United States which is critical for domestic nitrogen fertilizer production. Potash will always require international supply due to a lack of potash ore domestically. Russia/Ukraine unrest has created volatility in global natural gas markets, driving the cost of production of nitrogen around the globe to record levels and disrupting traditional trade flows for agricultural and industrial businesses. Russia/Belarus represent approximately forty percent of the global potash production; without their supply, the global supply and demand balance is in jeopardy. China’s decision in 2021 to suspend fertilizer exports has further exacerbated global supply issues, as it accounts for 25% of global phosphate exports and 13% of nitrogen exports.  By taking fertilizer off the world market in an effort to control its own domestic prices, China further disrupted trade flows and exacerbated price increases globally, and in the United States. In anticipation of China returning to the export market, the U.S. should lift any remaining Section 301 tariffs on fertilizer should there be an opportunity for the U.S. to access those supplies.

Question #9: Please comment on sustainability, climate, and other environmental concerns and risks relating to fertilizer markets. Have market concentration and power exacerbated these challenges and risks? Have they facilitated sectoral adjustment for climate and sustainability purposes? Would shifting fertilizer production to countries with high standards on labor and environmental protection improve competition, better manage sustainability risks, or otherwise improve public interest outcomes? What other strategies may exist to raise sustainability standards along supply chains?

Answer: The 4R (Right Source, Right Rate, Right Time, Right Place) Nutrient Stewardship practices align well with sustainability, climate, and environmental concerns. Growers work with their cooperatives’ certified crop advisors (CCAs) to seek efficient use of inputs and maximize their production. Data collected and analyzed by growers and their CCAs would suggest growers are making good progress on using just what is needed for the crop grown.  

Fertilizer production generally needs to occur wherever the fertilizer raw materials/minerals are readily available. This will promote efficient, sustainable manufacturing. Shifting production to countries with “high standards on labor and environmental protection” would be unlikely in and of itself to improve competition – even assuming the vast capital and natural resources were available to produce them. The fastest way to improve competition among producers would be to reduce trade protectionism.

Question #10: What obstacles exist to the financing and development of new fertilizer capacity that would enhance the competitiveness of fertilizer markets? Would new or expanded domestic manufacturing, mining, processing, or alternative fertilizer production capacity help promote access to and affordability of fertilizer for agricultural producers? Are there existing “shovel ready” manufacturing, mining, or other processes that could or should be adjusted to facilitate new fertilizer production? Are there other potential new entrants in the near or medium-term? How might USDA best support investment in new fertilizer capacity in the U.S.?

Answer:  The availability of the raw minerals, energy resources, and ingredients that compose fertilizer are capital intensive. New nitrogen fertilizer manufacturing facilities can cost billions of dollars and take years to plan and complete. The timeline for new production capacity is long (3-5 years). Fertilizer is a globally competitive market with some mineral fertilizer deposits only existing in certain countries.

Further, strict U.S. environmental restrictions (especially when compared to developing countries), also contribute to the challenges for new entrants. Environmental reviews for permitting, including environmental justice screening, should be fair, equitable, and streamlined. Permitting reform will allow domestic fertilizer production to grow and ensure that the industry and farmers can benefit from sourcing the raw materials needed for the final product domestically. The recent final revisions to the National Environmental Policy Act (NEPA) only increase uncertainty and delay the federal permitting process which in turn will only serve to decrease domestic phosphate and potash fertilizer production. Increasingly, growing uncertainty in permitting combined with significant permitting costs at a time with expanding foreign production is putting at risk domestic phosphate and potash production. Another way to address these challenges is to encourage cooperative investment in small fertilizer blending and treatment facilities. These facilities would increase efficiency and provide a more consistent source of product to farmers. By providing funding for fertilizer blending and storage, USDA would help cooperatives provide fertilizer in a timely and cost-effective manner.

Question #11: How can USDA further support more efficient use of fertilizer? Are current precision agriculture tools effective at reducing fertilizer application rates without impacting yield? Could sub-field management of application rates improve economic resiliency of farms? Are there tools that USDA could support to facilitate better application rates, timing, and appropriate use of existing fertilizer sources? How could risk management tools such as crop insurance help with yield gaps from reduced nitrogen application rates, for example? How could USDA’s working lands and other conservation programs better support more target and efficient use of fertilizer? How might adverse community, labor, and environmental costs arising from the production fertilizer in certain geographies be better factored into USDA grants, loans, or regulatory programs? Are there ways USDA could support more effective use of other fertilizers (e.g., manure) from livestock? Could considering these factors improve competition in certain markets? Please share your views.

Answer: Agricultural retailers are an important resource for farmers when it comes to providing agronomic recommendations and nutrient-management planning for their crop plan. National Resources Conservation Services (NRCS) has more demand for their work than person-hours available to meet farmer demand for nutrient and conservation planning. The 2018 farm bill aimed to enhance the availability of nutrient management and conservation practice planning by allowing the Technical Service Provider (TSP) program. The 2018 farm bill directed the USDA to streamline the process through which qualified employees in commercial entities, such as agricultural retailers and farmer co-operatives, could become certified to be a TSP. The 2018 farm bill also provides authority for these nonfederal entities to act as a certifier of technical service providers. We know further streamlining of the TSP program is needed for the program to improve farmer participation in USDA nutrient management and conservation programs.

An example of how CCAs were used can be found in the Conservation Security Program (CSP). It allowed the CCA’s plan to serve as documentation for producers implementing certain enhanced conservation activities within CSP. When a producer signs up for CSP, he or she must choose from a list of enhancement activities to implement, such as Water Quality Enhancement Activity – WQL04, plant tissue tests and analysis to improve nitrogen management, WQL05 – apply nutrients no more than 30 days prior to planned planting date, and WQL07 – split nitrogen applications, 50 percent after crop emergence or pasture green up. At the end of the production year, a producer must provide paperwork proving they implemented the enhancements or a plan from a CCA that confirms each of the required practices was completed. This option for CCA plans was a part of CSP program in recent farm bills. The NRCS guidance documents for the enhanced conservation activities allowed a CCA to sign off on the implementation of the enhancement with the producer required to turn their records into the NRCS. CCA review grower compliance and use of the CCA plan for documentation helped speed the implementation of the program and made it easy for producers. NRCS retains the ability to audit growers. The option of CCA plans serving as documentation that the producer complied with the program appears to have been removed at some point because the language is not clearly listed on the guidance document for enhanced practice implementation. If CCA plans are not accepted documents for this program, it is an example of placing more work within the NRCS local offices that are already backlogged and decreases producer participation in the program. Few producers have the time to wait for the NRCS to catch up even while the staff works very hard to do so. CCA plans should be recognized as documentation the growers can use for CSP enhancement implementation. The TSP program can use this example established in the CSP program to streamline the TSP program to allow CCA plans to qualify as documentation required to implement some of the NRCS programs. This action would expand producer participation in other USDA programs. For example, if a Code 590 nutrient management plan could be written by the CCA and approved by the CCA, this plan could be used by the NRCS to meet documentation requirements. The NRCS can review the documents for approval, or a quicker system would be to audit a certain percent of the Code 590 plans filed by CCA’s for compliance. If additional training is needed, those programs can be established. Practical implementations of nutrient management plans, cover crop plans, and other practices can be well implemented by CCA plans. USDA should increase where possible financial incentives to growers to conduct nutrient management planning (e.g., Code 590 cost-share for nutrient management) and expand use of other precision ag practices to maximize efficient fertilizer use. This can be achieved by removing barriers that limit the number of individuals who can write 590 nutrient management plans and expand the number of groups that can apply for NRCS funds for implementation of nutrient stewardship practices. Actions to achieve that goal in addition to allowing CCAs to create nutrient stewardship plans include expanding access to the 590 grant program, allowing agricultural retailers to be eligible for the NRCS grant program and Regional Conservation Partnership Program (RCPP) funds, building a dedicated Environmental Quality Incentives Program (EQIP) initiative focused on climate smart nutrient stewardship adoption, and increasing the cost-share ratio of NRCS programs. There is no better time than now to optimize fertilizer usage. If the NRCS remains interested in providing training for their documentation requirements for programs, CCAs should be allowed to select their training modules for the most-used practices in their area. A TSP does not need to be trained in every NRCS program to be effective. The CCA program is what makes conservation and nutrient management happen fastest on most farms in the U.S. The easier it is for CCAs to make conservation recommendations and nutrient management the quicker on farm adoption may be for enhanced conservation practices. Land grant research funding for fertilizer research has struggled to keep pace with the demand by modern agriculture. The trend can be viewed as flat and if inflation is considered it could be viewed as down. Research focused on soil/plant interactions is continuously needed for us to improve our efficiency of use, environmental management, and to improve the economy resiliency of farms.

See:

USDA can promote more efficient fertilizer use by mandating that AAPFCO (Association of American Plant Food Control Officials) shares its data on fertilizer consumption with all the agencies and associations involved in agriculture on a quarterly basis.

Question #12: Are there concerns or challenges related to data—e.g., to collection, privacy, accessibility, control, concentrated market power, or any other aspect—as it affects affordability, accessibility, and use of more targeted application of fertilizer? For instance, to what extent does the expanded application of targeted site-specific crop management using data from sensors, climate readings, or mechanical systems in agriculture impact competition and farmers’ access to fertilizer or other agricultural inputs? Is there evidence of firms with market power using information obtained regarding farmers’ farming practices to adversely affect farmers or competitors? Are there ways that USDA or other agencies can safeguard a farmer’s control of data and enhance competition and fair access?

Answer: Data collected by the USDA from producers should be considered proprietary and confidential to the producer. Only de-identified and aggregated data sets of a size large enough so that individuals cannot be identified should be used for trend analysis of program implementation.

Question #13: Please comment on the availability and accessibility of market information and data for fertilizers. Which public or private sources do you rely on to receive information on fertilizer prices and other related markets? Are you able to access timely, accurate, and comprehensive information on spot prices of fertilizers in local, regional, and national markets? If not, how can USDA further facilitate price reporting information and transparency for market participants? Beyond price reporting, what other market related information would be helpful that is currently limited or not accessible?

Answer: Market information on fertilizer is widely distributed through free avenues such as local supply partners and social media platforms, as well as through paid channels such as industry publication services. The Illinois USDA publishes a weekly average retail price series available for free.  It would be helpful if USDA publicized the release dates for their acreage, planting reports, etc., preferably through an email subscription.

Question #14: In what other ways can USDA support farmers’ ability to adapt to variability in fertilizer costs? How might USDA assist small producers in hedging or otherwise mitigating sudden, unexpected jumps in the spot price of fertilizer? How might USDA better support modes of production that rely less on fertilizer, or support access to markets that may pay a premium for products relying on less fertilizer? How can USDA further facilitate appropriate conservation of land, and/or support farmers’ flexibility in starting up and sustaining other farm enterprises?

Answer: High prices for fertilizer in 2022 are already creating incentives for farmers to look for alternatives to either reduce their fertilizer use or to get more efficient use of the fertilizer they do apply.  Market mechanisms may be the most effective tools to encourage innovation; however, USDA could also provide financial assistance to cooperatives to help them increase production and storage.

Question #15: What other tools, investments, or programs could USDA or other agencies deploy to enhance the competitiveness of fertilizer markets? Please suggest any other actionable steps that USDA or other agencies could take to help address any identified concerns.

Answer:  Our national energy security depends on a broad mix of energy resources to assure the least amount of market disruption. A realistic transition to renewable energy must be implemented that allows natural gas to continue to be a feedstock for energy generation and fertilizer manufacturing. The U.S. experiences a competitive advantage in the world market when natural gas is plentiful and available. Renewable energy development and new fertilizer manufacturing processes can continue to be developed and ramped up at the same time.

Supply chain disruptions due to COVID-19 and the Russian war in Ukraine have shined a light on how precarious our supply of inputs is, particularly fertilizers, which have doubled in price over the past year. We applaud USDA’s recent announced plans for $500 million to support innovative American-made fertilizer and welcome the opportunity to work with USDA in determining eligibility requirements to best support the development and production of potential innovative fertilizers that would support domestic production. Additionally, we encourage USDA to monitor and make publicly available information regarding fertilizer production, supply, and demand. Agricultural production powerhouses across the world have already taken major steps to invest in fertilizer and input subsidies to ease the financial burden on their producers. USDA should analyze the impact of these actions and recommend ways to enhance the competitiveness of U.S. farmers in the short-term and improve the farm safety net to maintain and grow our ability to produce safe, sustainable, cost effective and abundant food for the future. Additionally, we encourage USDA to work with your counterparts at the Department of Interior to expand the United States Geological Survey list of critical minerals to include minerals of importance to agricultural production, including phosphate and potash. Inclusion on the list, does not avoid any regulatory requirements, but does streamline the permitting process providing greater certainty and a shortened timeline for producers encouraging more domestic production. There also is opportunity for the Administration to allow for the sustainable reuse of phosphogypsum (PG). PG is a byproduct of phosphate fertilizer production and is currently required to be stored in above-ground stacks at a cost of hundreds of millions of dollars to domestic producers putting them at a global competitive disadvantage. PG is increasingly being safely recycled for a variety of uses in Europe, South America, Asia, Africa, as well as in Canada, and according to the International Atomic Energy Agency should not be restricted in such uses as agriculture, road construction or marine environments. Under the previous administration, the U.S. Environmental Protection Agency (EPA) approved PG reuse for road construction before being overturned by the current administration. The U.S. should join the rest of the world in making an allowance for the safe, sustainable, and environmentally conscious use of an otherwise product being managed as a waste. USDA also should implement an e-mail subscription service for its acreage and planting reports. The Office of Foreign Assets Control (OFAC) and Department of Treasury are already doing it for their sanctions and blocked persons updates. USDA could copy a similar model. 

Conclusion

The U.S. continues to provide one of the safest, most affordable, and abundant food supplies in the world. Adequate and timely access to fertilizer supplies is key to that success. We appreciate this opportunity to provide comment and look forward to working with USDA towards our common goals.  

Sincerely,
Charles F. Conner
President and CEO
National Council of Farmer Cooperatives

 

Appendix A

We also offer these comments from NCFC member Land O’Lakes, Inc. Land O’Lakes, Inc. (LOL) is the parent-company to four main business units: Dairy Foods, Purina Animal Nutrition, Truterra, and WinField United. Land O’Lakes, Inc. and our business units are focused on helping farmers identify and adopt on-farm stewardship and management practices that improve their economic and environmental sustainability.WinField United is a farmer and customer-owned wholesale supplier of crop protection inputs, seed and crop nutrients that operates over 900 agriculture retail locations across the country. Land O’Lakes and WinField touch over 50% of the harvested acres in the U.S. and do business in all 50 states.

Positioning:

1. Growers need access to resources that help them navigate the complex, global fertilizer market – like agriculture retail networks.

  • WFU distributes crop protection and fertilizer products to farmers through our federated cooperative system which consists of over 900 agriculture retailers. These retailers vary in size from “mom and pop” local retailers to large, multi-state operations. These retailers have a reverse-ownership stake in LOL and are critical partners for our enterprise. Our goal is to provide product and services to our retail owners that keep them competitive and able to meet farmers’ needs amidst changing growing conditions and economic climates.
  • As such, we communicate frequently with our retail owners around forecasting, ordering, shipping, and tracking product. Part of this offering focuses on navigating the global fertilizer market. We have in-house specialists that track the fertilizer market, provide market intel, and make buy recommendations to our retailers. These services help save our member-owners money and pass those savings down to the farmer.
  • Additionally, we proactively forecast what we will need for the coming growing season and relay that information to manufacturers.
    • This allows us to harness system efficiencies and react to whatever the season brings while still providing the delivery service level that our owners and their growers need.
  • In summary, without access to these services, growers and retailers have to play on the opaque international fertilizer market themselves, a very resource intensive task. Increasing transparency in the global fertilizer trading market would ease these pains. However, the WinField cooperative model currently helps farmers gain a competitive advantage in the fertilizer market.

2. Open up and continue free, and open trading markets on crop nutrients with allied geopolitical partners.

  • WFU and LOL support the domestic fertilizer industry and policies that will make it more efficient and competitive globally. Our primary interest is in achieving competitive sources of product from which our retailer and distributor members can best serve their growers. We support reducing both domestic and international trade barriers. These barriers are contributing to market concentration and reducing or removing them will increase US growers access to competitive supply.
  • The agriculture industry is heavily weather dependent; thus, to ensure a strong US food supply, farmers require large volumes of agriculture inputs during tight time spans in the planting season. Hence, it is necessary for the US agriculture industry to have a strong and steady supply of fertilizer available to ensure adequate supply and to avoid wild price swings in the market. Our policy position supporting fair and free trade of agricultural products.
  • The United States government should prioritize enacting free and fair trade relationships on crop nutrients with allied countries. For example, LOL and WFU were aligned with the Agriculture Retailers Association opposing countervailing duties on phosphates from Morocco. WFU is also opposed to counter-vailing and anti-dumping duties on UAN from Trinidad, and Tobago. The current geopolitical crisis demonstrates that having a diversified fertilizer supply is crucial for global food security.

3. Continue investing in domestic fertilizer production and ingredient manufacturing capacity.

  • The fertilizer market’s major players produce and sell potassium, nitrogen, and potash. Ammonia, the most commonly used form of nitrogen fertilizer, can be produced anywhere in the world, however, production is highly energy intensive. Meanwhile, potassium and potash availability is highly dependent on where these mineral deposits exist globally.
    • Phosphate: In 2020, the US accounted for approximately 16% of global imports of phosphate fertilizer.
      • Most of the 2021 imports have come from Saudi Arabia, Jordan, Mexico and Australia.
      • Imports accounted for 15% of all domestic phosphate supply and the leading producers outside of the United States are China, India, Morocco, and Russia.
    • Potash: The United States imported most of its domestic potash supply in 2020 which accounted for about 17% of all potash imports globally. Only 14 countries produce potash, with most U.S. potash imports coming from Canada (86%), Russia (8%), Belarus (4%), Germany (1%), and Israel (1%).
  • Currently, we do not think the fertilizer market is too concentrated. However, the Russian war in Ukraine has exposed the vulnerability of fertilizer availability and the need to invest in domestic competition, particularly in the nitrogen space. USDA should examine the fertilizer industry on a nutrient-by-nutrient level when analyzing the market and invest where diversification is most needed.
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