Members of the North Dakota congressional delegation are seeking investigations by the Federal Trade Commission and U.S. Department of Agriculture into the reasons behind the towering fertilizer costs farmers are being asked to pay this year.
Sen. Byron Dorgan, D-N.D., has written a letter to FTC Chairman William E. Kovacic and joined Sen. Kent Conrad, D-N.D., and Rep. Earl Pomeroy, D-N.D., in calling upon USDA chief Ed Schafer also to initiate an investigation.
"I've made the request because I think this is a very serious problem for family farmers," Dorgan says. "This run-up in prices is almost unbelievable."
The FTC is responsible for investigation and enforcement of U.S. anti-trust and consumer protection law. Its Bureau of Competition deals specifically with issues of free market competition.
At Dorgan's request, Kovacic sent David Wales, deputy director of the Bureau of Competition, to Bismarck,?N.D., to meet with Dorgan and representatives of the North Dakota Farmers Union, the North Dakota Farm Bureau and several commodity groups.
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One of the main issues discussed was the fact that the fertilizer industry is far more concentrated than it used to be. There used to be as many as eight different sources available to North Dakota farmers. That's no longer true.
"It's devolved into just a couple of very large companies," Dorgan says.
This could indicate antitrust violations, but getting at the truth would require the special investigators and resources of the FTC.
The senator says there is a "shroud" that prevents easy examination of what's happening in fertilizer pricing.
"Is this simply big companies having the muscle to price in their own manner without competition? The fewer companies you have, the less competition you have. That's just a fact of life," he says.
There is virtually no pricing transparency, he adds, which could demonstrate the fertilizer industry's upstream and downstream costs and therefore their pricing profit levels.
The cost of fertilizer to North Dakota farmers has risen from about $450 million in 2006 to about $800 million in 2008.
"You impose about $350 million to $400 million added cost just in fertilizer on North Dakota farmers-- that's a huge burden," Dorgan says. "That's why I've asked the Federal Trade Commission to investigate what's causing it."
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He stresses that the problem has nothing to do with fertilizer retailers in North Dakota.
"They're not at fault here," he says. "They're having to pay huge wholesale prices, and when they call and get quotes -- they can't even get good quotes, necessarily -- and they've only got a couple sources from which to purchase."
The fertilizer industry has blamed the rising cost of oil and, particularly, of natural gas for the higher prices being passed on to their customers. Dorgan doesn't think that tells the whole story.
"I understand there's going to be upward pressure on fertilizer prices when you have petroleum prices going through the roof, but that does not justify the kind of fertilizer price increases we've seen," Dorgan says. "Everything has gone up, and some things have gone up a lot, but fertilizer has skyrocketed."
Whether the FTC will initiate a formal investigation is unknown, and typically will not be publicly divulged until it already is under way or completed.
