STEVE MOORE: Corporate greed isn’t driving food prices, global chaos and bad policy are
Trump administration announces $500 million domestic fertilizer support to protect US farmers
Agriculture Secretary Brooke Rollins outlines USDA’s $500 million FIELDS Program aimed at increasing domestic fertilizer production. He emphasizes that food security is a matter of national security, critical for America to be self-reliant in feeding and sustaining its population for the next 250 years, and discusses advancing agricultural technology.
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When food prices rise, politicians and activists instinctively look for a villain to blame. Amid the current instability, many will turn to domestic producers as a scapegoat for skyrocketing prices. This narrative may be politically convenient for some, but it literally reverses the economics of global supply chains.
The real reason why the prices of basic inputs in the American food supply like fertilizer are rising is not corporate greed or mismanagement. This is a combination of global disruptions, geopolitical instability, and misguided government policies both at home and abroad. All of these factors combine to make it difficult to produce the inputs on which American agriculture depends.
For example, fertilizer is one of the most important building blocks of the global food supply chain. Without it, crop yields decrease. When crop yields decrease, food production also decreases, resulting in increased grocery bills. However, fertilizer does not appear out of thin air. It is based on a complex combination of materials such as sulfur, ammonia and phosphate rock.
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These raw materials are sourced from all corners of the world and rely on international transportation networks. Many of these supply chains are currently under severe stress.
The ongoing war between Russia and Ukraine continues to disrupt key commodity markets and trade routes. Russia produced 7.5 million metric tons of sulfur last year, making it the world’s third-largest producer. This is because Russia is an oil-rich country and sulfur is a byproduct of oil refining. Recent Ukrainian drone attacks on Russia’s oil and fertilizer infrastructure have greatly reduced Russia’s ability to supply sulfur to the world. Russian ammonia exports also fell nearly 80% below pre-war levels.
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Tensions in the Middle East have further increased uncertainty about energy production and transportation routes. While the Strait of Hormuz is virtually stopped, approximately 16 million tons of fertilizer remains in limbo, geopolitical events remain unresolved. Additionally, roughly half of the world’s sulfur supply passes through the strait, increasing pressure on key input costs.
American leaders must pursue a policy that is free from global unrest, ensures a level playing field, and encourages diversified supply chains. This is not only good economics but also smart food safety policy.
When the supply of critical raw materials decreases and the cost of accessing them increases, prices for consumers will naturally increase. As unfortunate as this is, it is not evidence of a market failure. On the contrary, this is the market reacting to scarcity as in other scenarios. The bright economic minds of this administration need to realize this.
If policymakers want to lower prices for Americans, it would be a mistake to punish producers. The answer is to find ways to increase supply by easing the pressure of global uncertainty.
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This starts with eliminating policies that unnecessarily increase costs for domestic producers. Permitting delays, burdensome regulations, and restrictions on energy development make fertilizer production in the United States even more difficult. America has abundant resources and enormous production capacity. Policymakers should do everything possible to ensure that American companies can source the raw materials they need here at home.
The laws of economics have not changed. When supply is limited, prices increase. When food production and input supply increases again, prices will fall. (iStock)
At the same time, policymakers need to be wary of misguided business practices. Wherever possible, we need to secure input from a variety of trusted partners, both foreign and domestic, to help meet our domestic demand. Many foreign manufacturers also face the same problem. This is like filling an empty glass with an empty jug. The root problem persists.
Meanwhile, countries like China are exacerbating the problem with their own unfair trade practices. China is the world’s second largest fertilizer exporter. However, China has restricted the export of fertilizer and raw inputs such as sulfuric acid.
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American leaders must pursue a policy that is free from global unrest, ensures a level playing field, and encourages diversified supply chains. This is not only good economics but also smart food safety policy. If these problems persist into next year’s planting season, Americans will feel even more pain than they did this year, when many farmers purchased their fertilizer before these cuts.
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The laws of economics have not changed. When supply is limited, prices increase. When food production and input supply increases again, prices will fall.
If Washington is serious about lowering food costs and keeping America well fed, it needs to stop looking for scapegoats. Addressing this crisis requires looking at the root causes. You can’t solve traffic jams by blaming the car at the back of the queue. Obstacles on the road need to be removed. There is no shortage of obstacles that need to be addressed. American leaders need to focus their gaze there.
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