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OPINION The Shell Game of Koch, Nutrien ®, and CF
Fertilizer Costs are on the rise again, but the stock-standard industry explanations just don’t seem to hold water about why. A recent article by University of Nebraska professor John Westra seeks to provide many explanations for the change, but falls short. See Fertilizer Costs: What is Driving the Increase and How can Growers Manage It? (Feb. 8, 2022). Are fertilizer companies (and their shills) actually pricing ammonia fairly, or are they just explaining their prices enough to gain our confidence before moving the ball? A shell game is a sleight-of-hand game in which a token is concealed under one of three identical containers, usually a ball under a shell or a cup. The player then tries to track the ball as it is shuffled—in plain view under one shell—with the two other empty shells. Many view this game as a gambling game, but in reality, a shell game is a short-con. Like the ammonia industry, the game is rigged. The shell game con artist uses psychological tricks to convince potential players of the legitimacy of the game through shills—plants in the audience—or even by allowing a player to win a few times before beginning the scam. When money is on the line, like the ammonia oligarchs, they use sleight of hand to move or hide the ball during play and replace it as required. Do you want to learn how Oligarchs control our climate future and why it is time to break them up? · It is now possible to kill off the Oligarchs through the use of Green Play Ammonia™, a local supply of affordable NH3 for your farm. · It will be a loss for folks that invest in these companies with nasty exploratory records. They are public and private companies that tie their existence to fossil fuel built from coal oil and gas. Professor Westra starts by explaining how much the price of fertilizer has risen: “Significant increases in the cost of fertilizer over the past year have caused a lot of concern and heartburn among farmers and ranchers in Nebraska. Given that fertilizer costs now account for approximately 15-20% of total cash costs for corn production in Nebraska, fertilizer prices and availability are a major concern for farmers planning for the 2022 growing season. Farmers in some areas are reporting prices more than 300% higher than last winter, and delivery times seems to be anyone’s guess. Veteran growers may recall a similar situation in 2007-2009 when prices for nitrogen, phosphate, and potash doubled, or more, from pre-2007 levels But he continues by blaming the fact that fertilizer may be produced abroad: “Because fertilizer is a global commodity, it can be influenced by various market factors beyond the control of U.S. producers. Nearly 45% of all fertilizer materials are exported to a different country from where they were produced. This means that fertilizer prices are more volatile than if produced and consumed in the same country, because they are affected by what is occurring where they are produced, the cost of production in that country, demand from other countries needing fertilizer products, and costs to transport fertilizers to their destination.” Then the high consumption of fertilizer in the US is to blame: “Another confounding factor is that two-thirds of global fertilizer demand is driven primarily by six crops; and corn, wheat, and soybeans constitute about 36% of that total demand. So, as large producers of corn, soybeans, and wheat, the U.S. and Nebraska are large consumers of fertilize.” But why are Nebraska farmers such large consumers? Is it the human condition of ‘more is more’? In other words, are nutrients too cheap in relation to the commodity so there is no reason to throttle consumption? The problem with this explanation is that the price fluctuates even when the fertilizer application rate did not change. What’s more likely, is that the price of Nitrogen is being adjusted to producer profits. The on-farm profit potential increased and up went the price. The American ammonia industry is an oligopoly, controlled by just a few major players. The largest players are Koch Industries, Nutrien, and CF. These are America’s ammonia oligarchs. Oligarchs of ammonia are vertically integrated right to the producer. They know what they can get away with. The manipulation is a sting operation, commonly called “the great robbery of farm wealth.” Oligarchs work together in regions in a shell game to set prices based on the farmer’s profits, not the farmer’s demand for more nutrients. They start by hiding the ball: Since the country side has 400 million plus farm acres across the continent, nobody can figure out what is going on with the ammonia price. Regionalized oligarchs work together as a pack watching what each other is doing in their region. Transportation then locks down the competitive effect to zero. Then, the ball is shuffled by blaming the importer. Professor Westra says: Now on the supply side of the equation, the U.S. is the third-largest producer of fertilizer globally. However, because it consumes or demands so much to produce corn, wheat, and soybeans, among other crops, the U.S. is a net importer of all three nutrients, especially nitrogen and potash. This means that U.S. fertilizer dealers and U.S. producers pay the global market price for fertilizers, plus transportation costs. Is it always some other country’s problem of greater demand? Keep your eye on the shell game and watch the hand movements. The blame is always put to others. Everybody complains…even the fertilizer dealer is unable to overcome the complaints coming from the land owners. Blaming Somebody else works when you are an oligarch……keep your eye on the ball in the shell. The ag economist thinks the price is jacked way up because natural gas (NG) or methane is way overpriced: “To produce fertilizer, facilities use globally priced raw materials and substantial amounts of energy to convert the raw chemical materials into forms farmers can use. For example, anhydrous ammonia is produced by the Haber-Bosch process in which nitrogen is combined with hydrogen to synthesize the ammonia, using natural gas as the source of the hydrogen, as well as the energy, for synthesizing. Natural gas is an essential element for most nitrogen fertilizers, and accounts for 70% to 90% of the production variable costs in the synthesis process. So, natural gas prices have an outsized impact on nitrogen fertilizer prices. Because, natural gas prices have risen dramatically over the past few months, especially in Europe, it has forced many EU nitrogen plants to close. Because plants built for this process typically require three to five years to build, the long-run impact is that when a demand surge occurs, the response time to fulfill supply via an additional production facility will lag about three to five years at a significant price tag.” And now the blame game goes to Europe. BUT European producers do not directly apply NH3 to the land, so they do not get the benefit of primary nitrogen. They must use 2nd and 3rd process ureas and nitrates loaded with Carbon, meaning they have higher priced nitrates to begin with. Therefore, it doesn’t make sense to consider European pricing of nitrates when you are discussing the increased prices of NH3 in the US. Nor does it make any sense to discuss European plant closures. So, how did the economist figure out to blame Europe? My guess is that he must have called Koch Bros or CF or the Fertilizer Institute in Washington DC. Directly applied NH3 to the land assures the lowest cost of production. Keep your eye on the ball. · When NG is $4, ammonia is about $250 per ton to build. There is a really big opportunity if the price of ammonia can be raised to within 10% of solution 32-0-0 or urea….the shell game is on. · Since the CF, Koch and Nutrien look any opportunity to jack-up the ammonia price, the price rises 8 times bringing up the 32-0-0, 28-0-0 and 46-0-0 to within 10% of the 82-0-0 Ammonia price · The material 32-0-0 or salvage-and-convenience-nitrogen loaded with nitrate wins over primary, low-cost, and stable 82-0-0 ammonium nitrogen. Now you lost sight of the ball. Nothing is relative to the base price of NH3 and trillions of dollars have gone into the oligarchs’ pocket books. You have just discovered the Shell Game. Once you’ve discovered the Shell Game, it is easier to see its plays. Ag economists like Professor Westra blame natural disasters like the interrupted gas production during a freeze in America’s heartland last February that caused a 250,000-ton loss of production. For sure, 250,000 tons sounds like a lot of ammonia, but it is a drop in the bucket. 250,000 tons is less than 1.3% of the US ammonia produced. In the US, 16 million to 18 million tons is built every year at 44 fossil fuel plants. COVID is to blame, even though each ammonia plant averages only about 75 employees. Westra blames Russia and international politics. Westra blames transportation too, but why did ammonia transportation break down? It seems that there are bad railroads, no trucks, no fuel, and no drivers. But if we can’t use the railroads and roads, why not use the rivers? The answer is that we shut down the rivers to move imported ammonia. And, domestically the big three ammonia producers own the NH3 barges. There are no private barge owners and no import allowed on the rivers. The oligarchs have not invested in ammonia storage. Nor have they improved pipeline infrastructure (the Magellan Pipeline is a goner). Instead, they sent the Kansas farmer’s billions to Brazil to build plants in the free enterprise competitors back yard. Koch’s decision is not in the interest of Kansas land values or in the interest of the Great Plains economy. The problem is there is no master plan, and no regulation. Ag economists like Mr. Westra are examples of shallow thinking in deep water. · This is Front Street in Dodge City…somebody is going to die. It will be the fossil ammonia Koch Bros that die slowly off as fossil fuel demand drifts in 2030. The oligarchs cannot switch to green ammonia because they are fossil fuelers with high debt load in a declining market. · The break-up of the oligarchs is the business opportunity for the Nebraska land owners because they will no longer have oligarchs driving them away from directly applied Ammonia in a Shell Game. · The market has no chance of being predictable with Koch Bros in the game. They live on fear-of-supply marketing by creating inland stranded ammonia.
Is it time to build a new empire without fossil fuel? Zero Carbon, Green Hydrogen and Green Ammonia is here. The Biggest chance to improve the climate for humans comes from Agriculture and stopping the expansion of fossil fuels. No-tillage farming and total reset of commercial fertilizer, manufacture, use, and application must be taken seriously. Come in Lincoln, Nebraska. You will discover the problem of capitalism run-a-muck. Keep your eyes on the ball. The Shell Game requires your immediate attention.
How Exactrix® And Green Play Ammonia™
Are Working Together Reduce Last fall, nutrient costs were reduced by 2/3 for one client in Nebraska
Green Play Ammonia is working to provide Exactrix owners with seven-year contracts at $100 to $300 per ton in 2024. On farm or on-site storage is required.
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