Countervailing duties on Russian and Moroccan imports of phosphate fertilizer will adversely impact the availability of phosphate fertilizer in the United States and adversely affect crop production and farmer livelihoods, according to joint comments to the U.S. International Trade Commission from agricultural groups in regard to a petition by the Mosaic Company.
The U.S. Department of Commerce announced Feb. 9 its final determination that phosphate fertilizer imports from Morocco and Russia are unfairly subsidized. Commerce calculated a subsidy rate of 19.97% for Moroccan producer OCP. In the Russia investigation, Commerce calculated rates of 9.19% and 47.05% for PhosAgro and EuroChem, respectively, and a rate of 17.2% for all other producers/exporters.
The ITC is conducting a concurrent investigation to determine whether Moroccan and Russian phosphate fertilizer imports materially injure the U.S. phosphate fertilizer industry. A final ruling is expected by mid-March. If the ITC’s ruling is affirmative, then Commerce will issue countervailing duty orders, which will remain in place for at least five years.
The American Soybean Association, National Corn Growers Association and National Cotton Council filed joint comments to the ITC opposing the countervailing duties. Phosphate fertilizers are widely used by corn, cotton, soybean and other crop producers throughout the United States. Phosphorus is one of several main macronutrients necessary for plant growth and is vital to crop production. Adequate levels of phosphorus in the soil benefit early season root development and help provide the energy crops need to maximize growth and production.
Kevin Scott, ASA president and soybean farmer from Valley Springs, South Dakota, says, “We believe countervailing duties on these imports will have a negative impact on the availability of phosphate fertilizer in the United States and, in turn, adversely affect crop production and farmer livelihoods.”
Mosaic’s petition in support of countervailing duties is not in the best interest of a healthy U.S. agriculture marketplace, jeopardizing domestic availability of phosphate fertilizer and reducing the competition and choices available to farmers, the groups note.
Three countries dominate the exports: Russia, Morocco and China for the share of world’s monoammonium phosphate (MAP) and diammonium phosphate (DAP) exports from sources other than the United States. U.S. imports from China are currently subject to a 25% tariff under Section 301. If these proposed countervailing duties are applied to Morocco and subject sources in Russia, less than 15% of the exports in the world would be available to U.S. farmers without tariffs, the comments note.
New Orleans (NOLA) DAP prices have historically been lower than other world prices. This became more pronounced in 2019 due to high prevented planting acreage in the U.S. The markets attempted to reallocate phosphorus to other areas of the world during this time. After the ITC investigation was initiated, imports from Russia and Morocco collapsed in 2020 with the two countries exporting around half of their 2019 levels.
Despite the market’s attempt to pull more phosphates into the U.S. by increasing the NOLA price relative to the world, other exports could only fill a little bit of the gap.
In 2020, Mosaic owned 59% of the phosphate rock mine capacity in the U.S. The second largest company, Nutrien, has 25% of the capacity according to Green Markets. Likewise, Mosaic had 63% of the phosphate capacity and Nutrien 29% for the U.S. in the same year. “These statistics raise severe concerns about competitiveness when imports are restricted through duties that effectively insulate the domestic market,” adds the groups.
“Given the long timelines to construct new phosphate plants, the five-year span of the CVD, and uncertain nature of the Section 301 tariffs on China’s phosphate imports, it is unlikely that new capacity will be constructed to help meet the shortfall,” the groups add.
On currently available phosphates, producers will still face significantly higher costs. “Our analysis indicates that domestic producers could face over $80 per ton increase in the price of DAP,” the ag groups write. “This would decrease farmers' income by over $800 million.
“This is in addition to other factors currently elevating fertilizer prices such as increased demand and higher natural gas prices. NOLA DAP prices have increased by $174 per ton since the beginning of November, which is a cause of concern among our farmers,” they conclude.