U.S. Market for Agricultural Fertilizers and Other Chemicals
Fertilizer is plant food: a combination of nutrients added to soil to help plants grow. In the U.S., approximately 700 companies are involved in the manufacture of agricultural chemicals, with combined annual revenue of $30 Billion to $40 Billion. Fertilizers and pesticides each account for about 50 percent of industry revenue.
The $15 to $20 Billion annual U.S. pesticide market includes herbicides (50% of market based on dollar volume), followed by insecticides (30%), then fungicides, rodenticides, and biological agents. About 1,000 different pesticides are used in the U.S. The eight largest pesticide producers control 70 percent of the U.S. market. Most pesticides are synthesized from basic industrial chemicals.
The Fertilizer Institute reports a 7.8 percent increase in U.S. annual fertilizer consumption to 22.90 million tons for the fertilizer year ending June 30, 2007. Fertilizer prices are driven by increasing global demand, increased biofuel production of corn and soy, higher transportation costs, and higher energy prices.
Fertilizer mixtures contain various concentrations of nitrogen (N), phosphorous (P), and potassium (K). The industry is highly concentrated because of economies of scale in marketing and distribution. Large companies include divisions of Dow and DuPont, and specialized producers like FMC, Mosaic, and Terra Industries.
|Fertilizer||U.S. Farm Annual Market||Market Control||Major Product Types
(largest by volume in bold)
|12 million tons||8 largest producers control 80% of market||ammonium nitrate (AN),
urea-ammonium nitrate (UAN), ammonia, urea
|Nitrogen fertilizers are based on ammonia, made from nitrogen in the air; natural gas is the source of hydrogen and heat.|
|5 million tons||8 largest producers control 90% of market||di-ammonium phosphate (DAP), mono-ammonium phosphate (MAP), phosphoric acid, and superphosphates: tri-sodium phosphate (TSP).||Produced from phosphate rock that is mined, crushed, and treated with sulfuric acid. Largest U.S. deposits are in Florida.|
|5 million tons||—||common salts of potassium such as potassium chloride (muriate of potash) and potassium sulphate (sulphate of potash)||Potash is mined from salt deposits and purified by solution and crystallization techniques.|
Because local soil and crop conditions typically require custom mixtures of N-P-K, fertilizer mixtures are often made in local plants from basic fertilizer bought from large producers. The U.S. is the largest importer of nitrogen (over 50 percent of its supply) and potash (over 90 percent of its supply), and the largest exporter of phosphate. Transportation costs are increasing, including ocean freight, rail, and truck. In addition, 70 to 90 percent of the cost of manufacturing ammonia depends on the rising price of natural gas.
According to the National Fertilizer Institute, the top three fertilizer-using U.S. crops are:
|Fertilizer Top Crops in the U.S.||Quantity of Fertilizer Used
depending on cropping systems
|Total Acres planted in 2008||U.S. Crop Yield in Bushels 2008||Commodity Prices Nov.-Dec. 2008|
|Corn||1.5 to 2 pounds per bushel||87.3 million acres||12 billion bushels||$3.25 per bushel|
|Wheat||2.5 to 3.5 pounds / bushel||56.8 million||2.5 billion bushels||$5.20 per bushel|
|Soybeans||1.0 to 1.5 pounds / bushel||72.1 million||2.9 billion bushels||$9.40 per bushel|
N: Anhydrous ammonia (82-0-0): $815 per ton; urea (46-0-0): $560/ton; UAN (28-0-0): $425/ton; ammonium sulfate (21-0-0-24): $400/ton
N&P: di-ammonium phosphates or DAP (18-46-0), $1,130; mono-ammonium phosphates or MAP (11-52-0), $1,130; liquid (10-34-0): $870
K: Muriate of potash (0-0-60), $700.
Using a mean of the above prices per ton, the cost of fertilizer averaged $754 per ton – $0.377 per pound – approximately double the price 12 months ago. Applying these calculations to the data in the table (above), the cost of fertilizer represents 17 to 23 percent of the cost of a bushel of corn, 18 to 25 percent of the cost of a bushel of wheat, and 4 to 6 percent of the cost of a bushel of soybeans. As a point of reference, commercial corn meal is approximately 1 percent nitrogen by weight, wheat meal is 1.5 to 2 percent, and prepared soy is 7 to 8 percent.
Nitrogen is the fertilizer most commonly used in commercial agriculture. Plants need nitrogen to synthesize proteins and DNA, but the plants are unable extract the abundant nitrogen found in Earth’s atmosphere. Instead, the plants rely on nitrogen-fixing bacteria that grow on the roots of some plants, or obtain nitrates and nitrites from the soil. A century ago, German chemists named Fritz Haber and Carl Bosch developed a synthesis that now yields more than 100 million tons of fertilizer annually. The Haber-Bosch process is essentially a “brute force” approach to producing ammonia. Nitrogen and hydrogen are combined at extremely high temperatures (500 degrees Celsius) and pressures (300 atmospheres), which requires huge amounts of energy, usually natural gas. Nearly 2 percent of the world’s total energy use goes into fertilizer production, which is becoming ever more costly as fuel prices rise.
In addition to fertilizer production having a high energy price, fertilizer has unacceptably high environmental costs. To cite one example, agricultural run-off of synthetic fertilizers contributes significantly to oceanic dead zones along coastal areas. More than 400 coastal dead zones have been reported, from the Gulf of Mexico to the coast of China.
Nitrogen fertilizer is fundamental to feeding the world, and shortages could have grave consequences. Dr. Vaclav Smil, of the University of Manitoba, calculates that without nitrogen fertilizer, there would be insufficient food for 40 percent of the world’s population. Some fertilizer dealers in the U.S. Midwest ran out of fertilizer in spring 2008 because of limited supply.
When the Company conducted field tests of its microbial products a decade or more ago, the results showed fertilizer requirements dropped 25% to produce the same agricultural output.
 “Industry Overview: Chemical Manufacturing – Agriculture” by Hoovers.com (Nov. 8, 2008) at http://www.hoovers.com/chemical-manufacturing—agricultural-/–ID__161–/free-ind-fr-profile-basic.xhtml
 U.S.D.A. National Agriculture Statistics Service at http://usda.mannlib.cornell.edu/usda/current/Acre/Acre-06-30-2008.pdf
 U.S.D.A. NASS Crop Production at http://usda.mannlib.cornell.edu/usda/current/CropProd/CropProd-10-10-2008_revision.pdf
 “Agriculture futures mixed on CTOB” at Forbes.com (Nov. 11, 2008) at http://www.forbes.com/feeds/ap/2008/11/10/ap5673965.html?partner=alerts&partner=lingospot
 “Congressmen ask for probe of fertilizer price hikes” in Western Farm Press (June 12, 2008) at http://westernfarmpress.com/news/fertilizer-prices-0612/
 Rossi, A.M. et al. “Nitrogen Content in Food: a Comparison between the Kjeldahl and Hach Methods.” Journal of the Argentine Chemical Society – Vol. 92, N. 4/6, 99-108 (2004) http://www.scielo.org.ar/pdf/jacs/v92n4-6/v92n4-6a11.pdf
 Trafton, Anne, “Amid food price spike, nobel laureate eyes fertilizer,” MIT News (Aug. 18, 2008) at http://web.mit.edu/newsoffice/2008/fertilizer-0813.html
 Bradsher, Keith and Andrew Martin, “Shortage Threaten Farmer’s Key Tool: Fertilizer,” in New York Times (April 30, 2008) at http://www.nytimes.com/2008/04/30/business/worldbusiness/30fertilizer.html