Fertilizer Pricing The Last Straw For Farmers

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In the late winter of 1975, our family was having lunch in a Brandon, Man. restaurant. At the table next to ours, three fertilizer executives (two local and one from the U.S.) were discussing product pricing and bemoaning the fact that it was “much easier” for producers of potash or phosphate to justify price increases than it was for anhydrous manufacturers (which they were) since the main ingredient of their product was natural gas which was dirt cheap at the time.

By 1975, farm commodity prices had begun a serious downturn after two to three years of almost unprecedented highs and prosperity for farmers. In an article in the Manitoba Co-operator (a copy of which was lying on their table) farmers, reacting to the price drop, were threatening to summerfallow half their land. The article appeared to disturb and anger the three and the conversation eventually concluded with “Well, if they (farmers) won’t pay our prices, we’ll grow the grain in China or India.”

COME A LONG WAY

We’ve come a long way in 34 years. Recent comments by fertilizer executives (blaming farmers for world food shortages because of fertilizer cutbacks for the 2009 crop planting) reveal an attitude change from one of at least superficial obligation for price increase justification, to one of pricing by divine right. After merging and taking over and buying themselves out over the past three decades, crop buyers and input manufacturer-suppliers have created a marketplace with little or no competition and produced a climate unprecedented in modern times. Concurrently, these same corporations have, through lobbying and political influence, worked steadily at dismantling the public regulatory systems which have afforded producers some protection, geared solely, of course, to guaranteeing their own insatiable quest for profit.

In a brief presented before the House of Commons Standing Committee on Agriculture (June 11, 2009), the National Farmers’ Union produced statistics which indicate that over the past 24 years, input suppliers, etc. “have captured 99.6 per cent of the wealth generated on Canadian land.”

The presentation carried on to state that “Canadian farmers have produced and sold an overall average of $388 per acre per year with farmers being left to make do with just $1.45 per acre per year (overall Canadian average) in the form of net income from the markets – government payments excluded. The corporations that provide farm inputs and services – fertilizer, chemical and seed companies, banks, etc. captured the other $386.55 per acre.”

It is, then, small wonder, when fertilizer suppliers raised prices to astronomical levels over the past year and a half, that farmers decided to balk – a move which caused one company’s second-quarter earnings in 2009 to drop from $905 million in 2008 to $187 million for the same period in 2009.

Having maintained exorbitant price levels throughout the 2009 Canadian planting season, suppliers have now lowered prices (encouraged, no doubt by a recent $460-per-tonne Russian potash sale to India) to sell off at least some of the unpurchased surplus – also to India. In general, it looks as if the threat made in the Brandon restaurant all those years ago has materialized – carried out at the expense of Canadian farmers with Canada’s own resource sold into the Asian market at levels far below those charged to Canada’s own farmers. Fertilizer executives, when looking for someone to blame for possible food shortages (and perhaps crying over spilt bonuses) might take a glance in the mirror.

Beverly Stow farms near Graysville, Manitoba

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