Farmers in Michigan have actually seen fertilizer costs skyrocket by 60 percent over 2021 figures. The implications for food shortages and price hikes are chilling.
“An average 2,500-acre corn and soybean farm has seen their fertilizer bill increase $175,000 in the last year alone from $250,000 to $425,000,” Michigan Farm Bureau lead economist Loren Koeman told The Center Square.
The fertilizer price hike contributes heavily to the financial issues of farmers, who, like lots of Americans, have actually struggled with the 40-year-high inflation rate the nation is reeling from partially because of the Biden administration’s misdirected financial policies.
On Wednesday, the Michigan Legislature passed a bill authored by Republican state Rep. Steve Carra, asking for Congress, federal firms, and state departments to do something about the continuous fertilizer rate boosts and scarcities injuring Michigan farmers.
“Michigan farmers are facing the greatest increase in fertilizer prices in 13 years,” the resolution stated. “Without access to fertilizer, Michigan’s agricultural production will fall, and the state’s economy will suffer. Not only will farmers be directly impacted, but the broader supply chain will also suffer.”
The resolution revealed that a person of the elements adding to the rate walking was the United States Department of Commerce’s 2021 choice to slap tariffs on Morrocan phosphate-based fertilizers following a decision by the U.S. International Trade Commission that the import of those phosphatic fertilizers harms regional producers.
“These tariffs place a substantial burden on farmers who are unable to compete with rising costs of production,” the legislation noted, adding that “due to the highly consolidated structure of the U.S. fertilizer manufacturer industry, many farmers have little bargaining power with suppliers.”
“For example, one company controls an estimated 90 percent of the U.S. phosphate fertilizer production while another controls nearly half of U.S. urea fertilizer production,” the resolution continued.
“This highly concentrated structure has resulted in local input dealers having very little bargaining power with the manufacturers, and cost increases are inevitably passed on to farmers.”
Speaking with The Center Square, Koeman explained 4 significant elements affecting the rate hikes.
One noteworthy aspect, the economic expert said, was the war Ukraine, which has actually injured the supply of Belarusian and Russian fertilizers because of sanctions troubled the belligerent countries by the U.S. and its European partners.
Another element was the increase in gas prices, which has had a significant impact on the production of nitrogen fertilizers since natural gas is a crucial ingredient in nitrogen fertilizer production.
Logistical traffic jams in shipping and trains due to increasing energy and labor expenses and inadequate trains and ships to fulfill needs have actually put in upward pressure on transport expenses.
The fourth aspect, as the resolution explained, was the structure of the fertilizer market. Two businesses work out a near duopoly over the marketplace for U.S potash, managing over 90 percent of its supply.
The tariff walls the federal government put up in the name of safeguarding regional makers have actually just served to improve these corporations while common farmers have actually needed to handle the high rates they set.
According to The Center Square, fertilizer business Nutrien delighted in a 10-fold boost in 2021 benefit from figures 2020.
Koeman stated that the short-term effect of increasing costs would be farmers losing a share of their normal earnings.
To offset that, the rates of food may increase in the long run.