Healthy soil and sustainable growing

["Tradingpost" <tradingpost@lobo.net>]

What a great time to grow without commercial fertilizers. Our costs don't go 
up - theirs do, and so do their food prices

paul tradingpost@lobo.net
-----------------------------------------

Lofty Prices for Fertilizer Put Farmers in a Squeeze
http://online.wsj.com/article/SB121184502828121269.html?mod=hpp_us_whats_news
Wall Street Journal May 27, 2008; Page A1

At a time when food prices are soaring world-wide, so is the price of 
fertilizer, producing huge profits for leading fertilizer makers and stirring 
anger among farmers in the U.S. and India.

Fertilizer prices are rising faster than those of almost any other raw 
material used by farmers. In April, farmers paid 65% more for fertilizer than 
they did a year earlier, according to the U.S. Department of Agriculture. 
That compares with price increases of 43% for fuel, 30% for seeds and 3.8% 
for chemicals such as weedkillers and insecticides over the same period, 
according to Agriculture Department indexes.

Those skyrocketing costs are making it harder for farmers to expand their 
harvests in response to the global food crisis that has sparked rioting, 
rationing and export controls in many countries. Food prices have soared in 
recent months as the world's growing demand for grain, which has exceeded 
production for much of this decade, has reduced stockpiles to extremely low 
levels.
[Higher Farming Costs]

That's helped to draw attention to farm-production costs, including 
fertilizer. Farmers say too much market power is concentrated in the hands of 
a small group of companies in the U.S., Canada and Russia that dominate 
global production of potash and phosphate. Along with nitrogen, potassium, 
usually in the form of potash, and phosphorus, in the form of phosphate, are 
the main ingredients of fertilizer.

The price of fertilizer "defies rational explanation," says Robert Carlson, 
president of the North Dakota Farmers Union, one of the state's most 
influential farmers' groups. In a May 8 letter to North Dakota's three-member 
congressional delegation, he accused fertilizer companies of "price gouging," 
and asked for an investigation.

On Friday, Sen. Byron L. Dorgan, a North Dakota Democrat, said he is asking 
the Federal Trade Commission to scrutinize the industry's business practices. 
Sen. Dorgan heads the Senate Commerce subcommittee that oversees the FTC.

Tight Supplies Blamed

Major fertilizer producers deny any allegations of gouging. They say they are 
simply raising prices to reflect tight supplies and growing demand after 
years of relatively low prices.

But there's an unusual piece in the pricing puzzle: In several countries, 
obscure laws shield makers of potash and phosphate from certain antitrust 
rules. In the U.S., for example, phosphate makers are among a handful of 
industries empowered by the 1918 Webb-Pomerene Act to talk with competitors 
about pricing and other issues.

Some legal experts think that law has outlived its usefulness. "It's an 
obscure act that's moribund," says Jim Mongoven, an attorney in the FTC's 
Bureau of Competition.
FROM THE ARCHIVES

• Dairy Co-Op Faces Price-Manipulation Probe
05/19/08
• In Ukraine, Tiny Plots Of Farmland Spur Big Bet
05/12/08
• 'Saudi Arabia of Milk' Hits Production Limits
05/08/08
• As Food Prices Rise, Shoppers Stock Up
05/01/08

In India, the head of one of India's largest buyers of fertilizer is 
appealing to the United Nations for help. "The fertilizer prices are 
artificially going up due to the manipulation of traders and suppliers," said 
Udai Shanker Awasthi, president of Indian Farmers Fertilizer Co-operative 
Ltd., in an interview Friday.

China, after initial protests, recently agreed to pay $576 per ton of potash, 
up $400 from its previous deal in 2007, to Canpotex, a potash export cartel 
protected by an exemption in Canada's Competition Law.

In March, Russian antimonopoly regulators required the country's largest 
potash maker, Uralkali, to cut domestic prices of the plant nutrient after 
wrangling with the company over its pricing behavior in court. Brazil's 
government is considering nationalizing the country's fertilizer deposits to 
help reduce farmers' production costs.

Helped by soaring potash prices, Potash Corp. of Saskatchewan Inc., one of 
the companies that make up Canpotex along with Minnesota-based Mosaic Co. and 
a smaller Canadian producer called Agrium Inc., posted first-quarter net 
income of $566 million, or $1.74 a diluted share, nearly triple the 
year-earlier figure. The company's stock has risen nearly eightfold to around 
$200 from about $25 three years ago. Mosaic's latest quarterly earnings came 
in at $520.8 million, up more than 10-fold from a year earlier.

Phosphate, a mineral found in fossilized marine life, provides essential 
nutrients for plant-cell development, while potash, a rock mined from the 
earth, helps plants grow strong. Prices of both are climbing faster than 
those of nitrogen, which is manufactured in a process that requires lots of 
natural gas.

In North America, nitrogen fertilizers are applied liberally to corn and 
wheat fields. Urea, a nitrogen-carrying fertilizer, is selling for around 
$600 a ton, twice the price a year ago, mostly because of a steep run-up in 
natural-gas prices.

The price of phosphate has climbed to about $1,000 a ton, up from $365 last 
year, according to Green Markets, a trade publication, while the price of a 
ton of potash is now more than $700, up from $230.

Industry executives say their companies are trying to ramp up production by 
making their mines run more efficiently, but there are few new mines on the 
drawing board.

Michael R. Rahm, vice president of market and economic analysis at Mosaic, 
said his company's prices are a true reflection of supply and demand. "The 
industry was not equipped to deal with the surge" in demand, he said. Still, 
he said he understands how farmers might be concerned as prices continue to 
rise.

Bill Doyle, chief executive of Potash Corp., told investors in April on a 
conference call about quarterly earnings that buyers could soon be paying 
$1,000 a ton for potash. He added during the call that continued price rises 
will "be a shock" to some consumers.

In an interview Monday, Mr. Doyle called recent complaints about prices an 
emotional reaction. Fertilizer prices began rising in earnest about a year 
ago after a nearly decadelong period of stability. "People don't like higher 
prices," Mr. Doyle said. But "you never hear from anyone complaining when 
prices are low."

Mr. Doyle said he welcomes any investigation into his business but added that 
regulators will come to realize that the higher prices are "a pure function 
of the marketplace."

Outside analysts say the industry has plenty of supply. "There's not really a 
supply issue at the moment," said Steve Jesse, an agriculture economist at 
Rabobank Group of the Netherlands, a large lender to agribusiness around the 
world. The U.N.'s Food and Agriculture Organization said in a forecast in 
February that the world's supply of nitrogen, phosphate and potash is 
"comfortably sufficient to cover demand growth" through at least 2012.

Chemical fertilizers are so effective in raising crop yields that economists 
figure farmers would be able to feed billions fewer people without them. 
Fewer than a dozen countries have substantial potash reserves, while more 
than 160 countries consume the fertilizer.

Fertilizer manufacturers say they intend to focus on increasing the 
productivity of their existing mines. Mosaic, in which Cargill Inc. of 
Minneapolis holds a controlling stake, said it plans to "de-bottleneck" some 
of its Florida phosphate mines to boost supply.

Phosphate Mining

Potash Corp. said it can raise production to 15.7 million tons by 2015 from 
its current capacity of 10.2 million tons by improving the operation of its 
existing mines. Opening a new phosphate mine can cost more than $2.5 billion 
and take around seven years, the company said.

"Developing new production takes a long time, a lot of money, and an 
expertise that few possess," Potash Corp.'s Mr. Doyle recently told investors.

In the U.S., Potash Corp. and Mosaic are the sole surviving members of a 
phosphate export cartel called the Phosphate Chemicals Association. Under a 
90-year-old law designed to promote American exports, the companies are 
allowed to legally market and sell their product overseas as a single entity 
at a price set in consultation with one another. Similarly, Canada has 
Canpotex, and Russia has Belarus Potash Co., another export cartel.

While the individual cartels can't legally collaborate among themselves on 
pricing, they regularly -- and legally -- follow each others' price 
increases. After the Russian cartel recently said potash prices would rise to 
$1,000 a ton, Potash Corp.'s Mr. Doyle said Canpotex would soon match that 
price.

Denis Evstratenko, a UBS metals and mining analyst, said the cartels have 
little incentive to undercut one another in the current environment.

To protect American consumers, members of the U.S. cartel are required by law 
to compete against each other in selling their wares at home. But in today's 
global markets, the global price sets a benchmark so American farmers pay 
essentially what the cartels dictate.

"That's the whole key that we're running into this year," said John Hawkins, 
a spokesman for the Illinois Farm Bureau. "The barriers that we have seen in 
the past between domestic and international prices have just fallen down. 
We're now participating in a global fertilizer market."