Fertilizer Prices: Supply Shock, Not Antitrust Price-Fixing

Fertilizer prices have become one of the biggest cost pressures facing American farmers. In response, the Federal Trade Commission (FTC) launched a formal investigation last month into possible anticompetitive practices in the fertilizer industry. While farmers’ frustrations are understandable, rising fertilizer prices are better explained by global supply disruptions than by price-fixing schemes. Policymakers should focus on these supply shocks rather than assuming price-fixing is to blame.

Farmers’ concerns revolve around soaring input costs, especially fertilizer prices, which have risen more than 150 percent since 2020. Some claim the problem stems from a lack of competition and fertilizer producers’ pricing practices, citing how prices remain elevated even while corn prices have fallen. Some are also convinced of price-fixing schemes, noting that overnight prices jumped following the conflict in Iran, even without a change in warehouse capacity across the Midwest.

It is clear that fertilizer prices reflect basic supply and demand. The most straightforward explanation for rising fertilizer prices is a series of global supply shocks affecting critical fertilizer inputs. Fertilizer production utilizes sulfur, ammonia, urea, nitrogen, phosphate, and potash. The Middle East is a major fertilizer production hub, with much of global trade passing through the Strait of Hormuz, including 50 percent of the world’s sulfur. According to Reuters, amidst pressures of the war urea prices increased 55 percent and nitrogen fertilizer prices increased 33 percent.

As the supply of inputs decreases, farmers still need fertilizer to grow corn, soybean, cotton, rice, and wheat; demand remains relatively stable. Markets, which allocate scarce resources through prices signals, convey these realities to economic actors through higher prices.

Some farmers argue that the decrease in corn prices should result in a decrease in fertilizer cost. Lower corn prices reduce farmers’ revenues, but fertilizer prices are determined primarily by the costs and availability of fertilizer inputs rather than by corn prices. And although fertilizer prices spiked overnight, it must be noted that businesses do not wait for warehouses to empty before adjusting prices in response to expected future supply conditions. When a major shipping route such as the Strait of Hormuz is threatened, markets immediately incorporate the risk of future shortages into current prices. Above all, rising prices alone do not prove anticompetitive behavior.

The better solution to investigating fertilizer price-fixing is increasing fertilizer supply. Farmers highlight trade barriers and permitting obstacles. The Trump administration is already pursuing accelerated fertilizer manufacturing projects, streamlining permitting, and fast-tracking facilities such as the Blue Point ammonia facility in Louisiana,. These efforts address the actual source of the problem: constrained supply.

The FTC’s decision to investigate should not be confused with proof that price-fixing occurred. The agency’s move may satisfy demands for action, but investigations do not create fertilizer, reopen shipping lanes, or increase global supplies of key inputs. If Washington wants to help farmers facing higher costs and shrinking margins, it should focus on expanding fertilizer supply, reducing regulatory barriers to domestic production, and promoting stability in global markets. Rising prices are a signal of scarcity, not per se evidence of malicious business practices.