Fertilizer Markets: The Clash between Energy, Ag, Weather, Profits, and Policy

By Oranuch Wongpiyabovorn, Chad Hart, and John M. Crespi


Over the past 18 months, many prices have been on the rise. The general economy is facing its first significant bout with inflation in roughly 20 years. Agricultural commodity prices are high, with crop prices doubling over the time frame. While agricultural producers have enjoyed increased revenues with the boosted prices, they are now also facing increasing costs as the prices for agricultural inputs rise—agricultural land values (and cash rents) have soared and herbicide and pesticide costs have increased. However, the agricultural input with the most dramatic price rise has been fertilizer. US agriculture relies on a strong base of row crop production, with corn being the leading crop. To produce the high yields required to match global demand for corn, US corn production is highly dependent on fertilizer, including nitrogen, which is an essential nutrient for growing corn. Recently, anhydrous ammonia prices increased substantially, from $290 per ton in June 2020 to $1,350–$1,375 per ton in January 2022.

What is happening to the US and global fertilizer markets?

In 2021, several factors disrupted the US supply chain of fertilizer production in the short run, including extremely cold weather in Texas, Hurricane Ida, and the COVID-19 pandemic. The natural disasters in the southern part of the country paused the majority of fertilizer production as 56% of ammonia production capacity is located in Texas, Louisiana, and Oklahoma. The extreme weather not only directly impacted fertilizer production, but it also disrupted natural gas production, the major feedstock for nitrogen fertilizers. The limited natural gas production spiked natural gas prices from $2.71 per 1,000 cubic feet in June 2020 to $9.33 in February 2021 (USEIA 2022). Natural gas prices remained above $4 per 1,000 cubic feet throughout 2021. In addition, because the COVID-19 pandemic delayed plant maintenance, resulting in slower production, the supply problem worsened (AFBF 2021). Table 1 outlines the latest fertilizer supply and demand estimates from the US Geological Survey (USGS), along with recent trade data on fertilizers.

Table 1. US Fertilizer Data
Source: USGS (2022).
 AmmoniaPhosphate RockPotash
2021 Estimates1,000 metric tons
US Production14,00022,000480
Exports260 100
Apparent Consumption16,00025,0007,400
US Import Sources (2017–2020)  
Trinidad and Tobago63%Peru87%Canada75%
Venezuela2% Belarus8%


Table 2. 2021 World Fertilizer Production (1,000 Metric Tons)
Source: USGS (2022).
AmmoniaPhosphate RockPotash


Under normal conditions, imports would easily substitute for the shortage in domestic fertilizer supply. However, fertilizer production in other countries was also disrupted. Towards the end of 2021, world natural gas prices, especially in the EU and China, increased rapidly due to low inventories, high demand, and supply disruptions. EU natural gas futures substantially increased from about €19.82 per megawatt-hour (~$4.75 per 1,000 cubic feet) at the beginning of 2021 to a peak at €180.27 per megawatt-hour (~$46.75 per 1,000 cubic feet) on December 21, 2021. Although the situation has improved due to an increase in supply from Russia and a mild winter, EU natural gas prices remain as high as €81.91 (~$27.25 per 1,000 cubic feet) in February 2022. The fallout from the Ukraine-Russia conflict is likely to support high natural gas prices for some time.

As a result of high natural gas prices, some fertilizer plants in Europe temporarily halted or reduced their production from September to November 2021. Imports from other countries such as Trinidad and Tobago, the United States, and Australia replaced European production. Tight global supplies led to higher world fertilizer prices. In addition, China banned exports of urea and phosphate for domestic use until June 2022, Russia began its six-month quota on various fertilizer exports last December, and Belarus faces economic sanctions. These last three items are important as China, Russia, and Belarus are global leaders in fertilizer exports. While the United States has not traditionally sourced fertilizer from those markets, the lack of Chinese, Russian, and Belarussian supplies on the global market has forced countries that do rely on those supplies (mainly in Europe and South America) to search for alternative sources, including the countries from which the United States purchases.

Potential long-run factors

The expectation was that fertilizer prices would decline in the second half of 2022 as producers would be able to gear up production. However, several factors could prevent fertilizer prices from going back to the mid-2020 level, including natural gas pricing/supply, shifts in trade policy, increased acreage demand by farmers, and concerns about market power in the fertilizer industry.

Despite earlier declines in EU gas prices, high natural gas prices in Europe will likely persist due to the conflict between Russia and Ukraine and climate change regulation. The EU household and industrial sectors use natural gas to generate electricity, heat, and power. Additionally, the EU has become highly dependent on Russian gas as 44% of EU gas imports in 2020 were from Russia. Within the past few months, Europe has relied more on US exports of liquefied natural gas, putting pressure on the US market. Meanwhile, natural gas has been seen as a greener source of energy than coal and oil. As climate regulation becomes stricter, higher carbon prices could raise demand for natural gas, causing higher global natural gas prices in the future.

On the trade front, domestic manufacturers can and have requested tariffs on fertilizer imports to reduce what is seen as unfair foreign competition. The previous anti-dumping duties on ammonium nitrate and urea imports from Russia were lifted in 2016; however, the US International Trade Commission imposed tariffs on phosphate imports from Russia and Morocco in March 2021 as petitioned by Mosaic. Meanwhile, CF Industries has filed a complaint on UAN imports from Russia and Trinidad and Tobago. If the anti-dumping and countervailing duty on these imports is implemented, they are set to last for at least five years and add an extra cost of $12.78 per acre (Bergmeier 2022). The UAN tariffs could be imposed following the preliminary results from the US Department of Commerce’s report on the market price of fertilizer imports from Russia and Trinidad and Tobago.

High crop prices could also spur farmers into increasing acreages and/or farming their acreages more intensively. Smith (2022, p. 4) finds this a “plausible factor behind rising fertilizer prices.” If fertilizer companies are responding to perceived increases in demand, the increased prices seen today could be reflecting an expectation of demand tomorrow.

The potential for market power in the US and global fertilizer industry has been mentioned in previous research articles (Hernandez and Torero 2013; Li 2016; Bushnell and Humber 2017; Bekkerman, Brester, and Ripplinger 2020). After shale gas development in the United States, low natural gas prices led to an expansion in domestic fertilizer production. Even though new firms could enter the market, existing firms also expanded their production capacity, resulting in increased market concentration (Bekkerman, Brester, and Ripplinger 2020). There have also been a couple of high-profile mergers within the industry; and, by 2019, the four largest firms in the United States accounted for 72% of ammonia production capacity (USGS 2021). The challenge in testing for market power currently is that, as described above, there are several confounding factors presently influencing fertilizer pricing, including supply chain disruptions and trade policy, which would impact the results from and the conclusions made from market power models. An estimating issue with many of the commonly used techniques, referred to as New Empirical Industrial Organization (NEIO) models, is that a firm’s marginal cost must be statistically estimated, based on the underlying data, in order for the models to determine market power. Such parameterizations are akin to averages over the data sample and, hence, measured with error. During the last few years, because of many of the issues discussed here, it is not clear what an “average” marginal cost would be. Hence, NEIO models are quite likely to impose some sort of normality on the last few years as if they were the same as previous years. This does not mean researchers cannot perform such an analysis, but they must be very careful in the estimations and conclusions drawn from such models. Economists are always skittish to ascribe too much by simply looking at firm profitability because reported accounting profits are not identical to the profits economists seek when measuring market power and because profitability can arise in concentrated industries for a variety of reasons. Nonetheless, because stock prices and returns are commonly discussed in the popular press, table 3 presents some returns for comparison.

Table 3. Comparison of Average Returns, 2018/19 and 2020/21
Notes: “na”=not applicable. Net income for publicly traded firms is from continuing operations on last statement reported each year. Yara Intl. has not yet reported 2021 income. Mosaic and Bunge net income for 2018/19 is based on 2018 due to negative net income for both firms in 2019. Net income, stock prices, and the S&P 500 Index come from Yahoo! Finance and are the end-of-December reported values adjusted for splits and dividends. Iowa Farm Net Income is from ISU Extension with an estimate of 10% increase in 2021 over 2020 based on discussion with extension economists. Land price changes are estimated from the ISU Land Value Survey.
Fertilizer IndustryNet Income ChangeStock Price Change
   CF Industries (CF)45%25%
   Nutrien (NTR)-23%35%
   Mosaic (MOS)89%22%
   Yara Intl (YAR.OL)60%29%
   Bunge (BG)184%43%
Other Ag Industry  
   Archer Daniels Midland (ADM)34%36%
   Hormel (HRL)-9%13%
   Tyson (TSN)3%10%
Other Large Cap Firms  
   WalMart (WMT)23%34%
   Amazon (AMZN)93%68%
Market Index  
   S&P 500 Indexna40%
Average Iowa FarmNet Income ChangeLand Price per Acre Change


Table 3 shows that returns as measured by comparing 2018 and 2019 to the pandemic years of 2020 and 2021 vary greatly. The returns as measured by either net income or stock prices for the five publicly traded fertilizer companies that sell into the North American market are higher on average than those of the selected other agricultural industry players. Bunge clearly brings the average up but notice Nutrien had negative net income returns over this period. The fertilizer industry average net income return was higher than Walmart but not higher than Amazon and lagged both in terms of average stock price returns (31% for the fertilizer group vs. 51% for Amazon and Walmart). In fact, the fertilizer group’s average stock return (31%) is lower than the return of a portfolio of 500 other large cap companies as measured by the S&P 500 (40%). Net income and stock prices are not the same thing as measures of economic profit that accounts for market power, but they are suggestive. Stock prices, especially, reflect what investors think the potential for earnings are, and stock price returns for these companies before and during the pandemic should reflect investors’ broader market perceptions. The takeaway from examining stock price returns is that the fertilizer industry is similar to the broader market from an investment perspective.

Table 3 also presents average net income returns for Iowa farms. By comparison, Iowa farmers saw a 66% return in net farm income (compared with an average of 71% for the fertilizer industry and 9% for other ag firms); and, although stock prices are not available for Iowa farmers, if we examine land prices, there was a 16% average increase in Iowa farmland price from 2018–19 to 2020–21 (compared with a 31% increase in the stock price of the fertilizer industry). Untangling any relations from underlying market conditions affecting all firms is difficult; however, a recent study by Outlaw et al. (2021) finds that corn farmers’ incomes and fertilizer prices do seem to move together. More analysis of market power issues is needed. However, simply examining profitability returns or stock prices with farm income is difficult because issues such as trade, weather, and COVID-19 are impacting farms as well as their input suppliers. We do not know enough, but we do know that the last two years have greatly impacted all markets.


American Farm Bureau Federation (AFBF). 2021. “Too Many to Count: Factors Driving Fertilizer Prices Higher and Higher.” Last accessed 02/14/2022.

Bekkerman, A., G.W. Brester, and D. Ripplinger. 2020. “The History, Consolidation, and Future of the U.S. Nitrogen Fertilizer Production Industry.” Choices Quarter 2.

Bergmeier, D. 2022. “Corn Growers: Tariffs Will Spike Nitrogen Fertilizer Costs.” High Plains Journal. Last accessed 02/14/2022.

Bushnell, J., and J. Humber. 2017. “Rethinking Trade Exposure: The Incidence of Environmental Charges in the Nitrogenous Fertilizer Industry.” Journal of the Association of Environmental and Resource Economists 4(3):857–894.

Hernandez, M.A., and M. Torero. 2013. “Market Concentration and Pricing Behavior in the Fertilizer Industry: A Global Approach.” Agricultural Economics 44(6):723–734.

Li, C. 2016. “Three Essays on Agriculture Economics.” PhD dissertation, unpublished. Iowa State University.

Outlaw, J.L., B.L. Fischer, H.L. Bryant, and J.M. Raulston. 2021. “Economic Impact of Nitrogen Prices in U.S. Corn Producers.” Agricultural and Food Policy Center, Texas A&M, December 20. Last accessed 02/25/2022.

Smith, A. 2022. “The Story of Rising Fertilizer Prices.” ARE Update 25(3): 1–4. University of California Giannini Foundation of Agricultural Economics. Last accessed 02/25/2022.

US Energy Information Administration (USEIA). 2022. “United States Natural Gas Industrial Price.” Last accessed 02/23/2022.

US Geological Survey (USGS). 2021. “Nitrogen Statistics and Information.” Last accessed 02/14/2022.

US Geological Survey (USGS). 2022. “Mineral Commodity Summaries 2022.” Last accessed 02/23/2022.


1. Calculated from the 2019 capacity obtained from US Geological Survey (USGS 2021).

Suggested citation:

Wongpiyabovorn, O., C. Hart, and J.M. Crespi. 2022. "Fertilizer Markets: The Clash between Energy, Ag, Weather, Profits, and Policy." Agricultural Policy Review, Winter 2022. Center for Agricultural and Rural Development, Iowa State University. Available at agpolicyreview.card.iastate.edu/winter-2022/fertilizer-markets-clash-between-energy-ag-weather-profits-and-policy.