Oct 02, 2022

USDA hopes to boost fertilizer production as soon as next year

Posted Oct 02, 2022 8:00 PM
U.S. Secretary of Agriculture Tom Vilsack said $500 million of new federal grants will support domestic fertilizer production. (Jared Strong/Iowa Capital Dispatch).
U.S. Secretary of Agriculture Tom Vilsack said $500 million of new federal grants will support domestic fertilizer production. (Jared Strong/Iowa Capital Dispatch).

Iowa Capital Dispatch

The U.S. Department of Agriculture will invest $500 million to increase domestic fertilizer production, doubling its previous commitment, the agency announced.

The federal dollars would boost long-term projects and ready-to-go proposals that might have an effect as early as next year.

Some of the first projects to get funding from the Fertilizer Production Expansion Program are likely to include fertilizer plants that are already under construction and could be completed more quickly with an infusion of cash, U.S. Secretary of Agriculture Tom Vilsack said Tuesday.

“There are facilities that have been underway, are in construction, where opportunities may be accelerated to be able to deal with more product in 2023 or 2024,” he told reporters.

Vilsack mentioned an unspecified Michigan facility that might be a candidate for the funding. The Michigan Potash & Salt Company was expected to start construction this year on a $1.1 billion facility to process potash that is mined in the state, and one of the company’s executives has said the new federal funding would help the long-awaited project advance.

Potash — a potassium compound — is one of the most widely used fertilizers in agriculture. The United States is not a major global producer of it, according to USDA data. Canada, Russia and Belarus have accounted for about two-thirds of global production.

Michigan Potash has said its facility will have the capacity to fully supplant Russian imports of the fertilizer, but full production isn’t expected for three years.

The company did not immediately respond to a request to comment for this article.

The federal funding for fertilizer production is a result of costs that spiked in late 2021 and early 2022. Those prices have subsided somewhat but are still about double what they were at the start of 2021, according to a Green Markets’ fertilizer price index.

The price increases were driven by a number of factors, including shortages of natural gas used to make nitrogen fertilizers, limited fertilizer stockpiles and production disruptions caused by an August 2021 hurricane that struck Louisiana. Russia’s invasion of Ukraine exacerbated the problem.

So in March, the USDA announced a new grant program to increase domestic production with an eye toward supporting new, independent operations. The Biden administration has sought to reduce consolidation in agriculture-related industries.

The USDA is expected to start soliciting grant applications soon for awards ranging from $1 million to $100 million, Vilsack said.

A first group of applications due within 45 days will be geared toward projects that might increase fertilizer supplies in 2023 and 2024. A second round of applications due within 90 days will be for longer-term projects.

The grants will be paid through the Commodity Credit Corporation, which has traditionally funded loans and payments to farmers and conservations programs of the farm bill. Earlier this month, the USDA announced CCC money would be used to support a more than $3 billion “climate smart” program. At the time, Vilsack said the CCC has sufficient funds to support the new programs and fulfill its farm bill obligations.

The fertilizer grant program is part of a longer-term strategy to reduce prices and the country’s reliance on foreign products. The Biden administration has resisted calls to cut tariffs on certain fertilizers to help alleviate the recent high costs, saying the short-term benefits do not outweigh long-term trade goals.

Vilsack said increased domestic fertilizer production combined with better techniques to avoid the excessive use of fertilizers will help stabilize supplies and farmers’ costs.

“We’re excited about this,” he said of the new grant program. “We think it’s going to help reduce the cost, increase the supply, maybe generate opportunities for farmer-owned cooperatives as well.”

The USDA is set to hold two online seminars to explain the  Fertilizer Production Expansion Program on Oct. 4 and how to apply on Oct. 6.