Lack of competition fuels high fertilizer prices: FNA

(Resource News International) — A lack of competition in Canada enables
fertilizer manufacturers to charge higher prices in Canada
than in the U.S., according to Jason Mann, chief operating
officer for Farmers of North America (FNA) in Saskatoon.

Canada, especially Western Canada,
does not have the same level of competition in the fertilizer
industry as does the U.S., according to Mann, and the result is higher fertilizer prices for Canadian farmers.

“If I could buy through a U.S. fertilizer
manufacturer near the border, buy through a U.S. dealer, have
the product shipped to the U.S. and then haul it back into
Canada, I could save $60 per tonne. How ridiculous is
that?”

Mann said U.S. dealers hesitate to sell
to Canadians because if they are found doing so, the dealer will no longer be supplied by the manufacturer.

The reason for the increased competition in the U.S., Mann
said, is the strong import market. U.S. port facilities make
importing a feasible and cost efficient alternative to buying
fertilizer domestically. Domestic producers are forced to
lower their prices in order to remain competitive.

“The difficult thing about bringing fertilizer into
Western Canada is that we don’t really have any ports that are
set up to receive product. The infrastructure is missing. In
Eastern Canada it’s different… When someone brings fertilizer
into Montreal for distribution into Eastern Canada they’re
only going to have a $20 rail freight component, whereas to
send product from Western Canada to the East you’re looking at
another $85 or $90.”

“You would think that in Western Canada with all of the
domestic manufacturers that our prices should be better but
geographically we’re challenged.”

FNA recently signalled its desire to see more Canadian
fertilizer imports by purchasing a load of nitrogen fertilizer
from Russia and shipping it to the Port of Churchill for
distribution to farms across Western Canada. According to
Mann, the purchase was made in order to lower input costs to
Canadian farmers and to remind the fertilizer industry that
there are alternatives for Canadian farmers.

“To bring product into Western Canada, obviously
Churchill is a lot closer than Montreal. If you can save
$40 per tonne on your inland freight costs, that works out
to about 10 per cent of the price.”

Also drawing attention recently to the price disparity
between Canadian and U.S. fertilizer prices was the release in
October of a report commissioned on behalf of Keystone
Agricultural Producers in Manitoba. The study compared
Manitoba and North Dakota fertilizer prices and found that
farmers north of the border pay an average of 33 per cent more
than their American counterparts.

When asked to investigate the reasons for the high
prices, the federal Competition Bureau declined. According to
David Rolfe, president of KAP, the group was disappointed but
he added that it would continue their efforts to have the
glaring price disparity addressed.

The response of the Competition Bureau is unsurprising,
Mann said.

Agriculture is a highly organized
industry for everyone but farmers, who often lack the means to
lobby as effectively as large agricultural companies, he said.

FNA plans to make more overseas fertilizer
purchases and Mann said he wouldn’t be surprised if large
agricultural companies, without their own fertilizer dealers,
began making similar purchases.

The fertilizer industry did not respond to a request for
comments.