When Koch Industries announced a $3.6 billion dollar deal in December to buy OCI’s Iowa Fertilizer Co. in far southeast Iowa, Jason Sporrer said he was shocked.
The sales manager for a co-op that provides agricultural products and services in western Iowa said the facility had brought much-need diversity.
“They came online with kind of a big splash, which brought some competition to the marketplace, which probably held some prices down,” Sporrer said. “But now it’s going to go by the wayside, in my opinion.”
While still pending review by the Federal Trade Commission, some agricultural leaders and lawmakers say a finalized sale could put pressure on an already volatile market, creating a monopoly and higher prices for farmers. In January, several agriculture groups sent the FTC and the Department of Justice a letter calling on both federal agencies to thoroughly investigate the sale.
“While we would harbor grave concerns about any acquisition that further consolidates an agricultural sector as concentrated and as critical as fertilizer, those concerns are much more serious given this deal involves hundreds of millions in taxpayer dollars,” the letter stated.
Democratic lawmakers in Iowa also are raising concerns, pointing at more than $500 million in local, state and federal tax incentives that OCI received before opening the plant in 2017. At a press conference earlier this month, Rep. Megan Srinivas of Des Moines, said while taxpayers helped fund the facility, questions remained about what would happen to the plant’s 260 employees.
“And another key factor in that is also trying to ensure that Iowans' jobs remain here especially since they were incentivized to build here for that purpose as well,” Srinivas said.
In an email to Harvest Public Media, a representative of Koch Fertilizer said the subsidiary is focused on completing the transaction and operating the plant in Wever, Iowa.
“This acquisition is consistent with the significant investments we have made in our business to increase production, improve reliability, and expand our customers’ access to the products and services they need,” the statement said.
The fertilizer industry has seen massive consolidation in recent decades, with a decline in the number of U.S. firms from 46 in 1984 to just 13 in 2008. Today, the top four producers own roughly 80% of production, according to Chad Hart, a professor of economics and extension economist at Iowa State University.
“I think that always puts up what's called the yellow caution lights within the industry, you know, within the sector about okay, you know, are we truly maintaining the competitive balance there or not?” he said.
Hart expects the FTC and DOJ to look at the deal carefully before the transaction is finalized.
“They tend to look at any of the big mergers that we see within agriculture, just to, you know, sort of check, and say, ‘Hey, we're going to look under the hood here and see if things are running like they're supposed to be running,’” Hart added.
The sale comes after a big spike in fertilizer prices in 2022 caused, at least in part, by the war in Ukraine. While prices have since fallen, Hart said they remain above average.
The U.S. Department of Agriculture has responded to consolidation and high fertilizer prices by developing the Fertilizer Production Expansion Program, launched in 2022. The program’s goal is to spur competition and increase production. More than $166 million helped fund 40 projects across the country. The Biden Administration pledged up to $900 through the Commodity Credit Corporation for investments in the months to come.
The agency is also pushing for the FTC and DOJ to scrutinize the sale of the Iowa Fertilizer Co. plant. In an email to Harvest Public Media, a USDA spokesman wrote that both producers and consumers bear the brunt when a sector is dominated by a few companies.
“Developments like this underscore the importance of President Biden’s whole-of-government effort to promote competition in the American economy. This effort includes stronger enforcement of antitrust laws ...” the statement said.
In western Iowa, Jason Sporrer keeps a close watch on fertilizer prices, not only for work, but for his other profession as a farmer. He uses fertilizer to help his corn crops grow.
“I think you're probably going to continue to see consolidation in different places. I think that's inevitable,” he said. “Okay, and at what point does that stop?”
This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest. It reports on food systems, agriculture and rural issues.
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