The world's agriculture depends on a mineral that is declining in production and is controlled by a cartel of companies. Troubling, ain't it?
Modern farming methods depend increasingly on fossil fuels and major plant nutrients: nitrogen, phosphorus, and potassium.
We know that peak oil is fast approaching, if it has not already arrived. This isn’t the only shortage that should concern us. We are seeing the same coming shortages in nitrogen, phosphorus and potassium.
Peak phosphorus is occurring along with peak oil. The earth’s supply of these critical resources is dwindling rapidly.
A New York Times writer recently said that phosphorus availability is “the gravest natural resource shortage you’ve never heard of.” The fact is, corporate and political control of essential plant nutrients may be the gravest long run competition issue you’ve never heard of.
And control of these resources may also be the greatest strategic issue facing the United States that you never heard of.
The country has an ambitious plan to replace imported oil with biofuels produced from plant matter. But dwindling U.S. reserves of the nutrients needed to produce biofuel feedstocks and political instability in countries where most phosphate rock reserves are held suggest that this plan may be replacing energy dependence with phosphorus dependence.
This is an issue for the world. The potential severity of phosphorus shortage has led Swedish researchers to proclaim that the global economy could flip from one that revolves around ownership of oil reserves to one based on who owns — and controls — phosphorus reserves.
The change could happen within ten to 20 years.
Where do we get our fertilizer?
The United States is increasingly dependent on other countries for critical plant nutrients. Imports account for 57% of nitrogen and 86% of potassium fertilizers used in the U.S.
At present, our phosphorus fertilizer needs are met from domestically mined rock phosphate. About one-half of this country’s production of phosphorus is exported, primarily to China, Australia, Canada, Brazil, and Mexico.
Nitrogen is made from natural gas. So nitrogen imports come from Trinidad, Tobago, Canada and Russia because these countries have low natural gas prices. Potassium comes from Canada and Russia.
Of these natural resources, phosphorus is the most critical to the world’s food security. Phosphorus is necessary for all living matter — plants, animals, humans, bacteria, and all other kinds of critters. Humans get phosphorus from plant and animal food products.
From a practical standpoint, phosphorus is neither created nor destroyed, but it does change form and location. Phosphorus removed from fields in plant material must eventually be replaced to avoid food and plant biomass yield decreases.
Modern agriculture is very wasteful of phosphorus. It is flushed down toilets and lost from farm fields through erosion and runoff.
Factory farming has concentrated livestock and poultry production, thereby concentrating waste production in the same areas. Livestock and poultry waste contains nitrogen, phosphorus and potassium and is a valuable fertilizer.[img:phosphoruschartresized.jpg]
But this waste isn’t spread around. It is heaped up in particular areas. There is enough poultry waste produced each year in the Illinois River valley in northwest Arkansas to cover a 115 mile two lane highway from Tulsa to Fayetteville to the depth of 18 inches.
Meanwhile, improper application to land or over application can cause environmental problems.
Runoff often results in problematic algae blooms—”pond scum” to rural folks–in tanks, lakes and rivers. Phosphorus from livestock waste collects in sediments at the bottom of ponds, lakes and rivers, but recovery of this phosphorus from either human or animal sources is expensive.
Who will control the supply of fertilizers?
Morocco and China have 60% of the world’s estimated phosphorus reserves. South Africa, Jordan and the U.S. have smaller deposits. At present consumption rates, world reserves will be depleted within a century.
The U.S. supply will be exhausted in 15 to 30 years.
China has imposed a 100-175% tariff to curtail phosphorus exports, yet the U.S. continues exports to China. Without changes in farming systems to reduce or eliminate phosphorus waste, the United States will be dependent on politically unstable countries for phosphorus.
The world’s fertilizer industry has a long history of government or corporate cartels. These cartels have agreements (either tacit or explicit) to fix prices at artificially high levels and to divide the market.
Between the world wars, 90% of phosphate rock exports were controlled by cartels. And cartels still dominate fertilizer reserves and trade.
China’s export taxes effectively take that country out of the world market, leaving phosphorus mined in the United States and Morocco as the major sources. Trade in phosphorus is dominated by three corporations: Mosaic (Cargill), Potash Corporation of Saskatchewan, and OCP. Cargill and Potash Corp. have annual fertilizer sales of about $20 billion annually, while OCP has annual sales of phosphorus of around $10 billion.
Potash Corporation of Saskatchewan was formed as a Crown Corporation by the Saskatchewan government in 1975 but was privatized in 1989, becoming a publicly traded corporation. Potash Corp. also has substantial stock holdings in other fertilizer companies. It owns 14% of ICP (Israel, Spain, UK), 28% of APC (Jordan), 32% of SQM (Chile), and 22% on Sinofert (China).
Cargill owns or controls over 30% of the U.S. reserves of phosphate rock, while Potash Corp. has 50% of domestic reserves.
OCP is a Moroccan-sanctioned, privately traded monopoly that controls practically all of the reserves in Morocco and the Western Sahara. OCP deals exclusively in phosphorus, while Cargill and Potash Corp. also manufacture nitrogen and mine potassium.
Three company control
Having only three transnational companies — Cargill, Potash Corp., and OCP — control reserves and trade for a critical input to food production is alarming. But the political and economic control of these products is even more troubling.
Cargill and Potash Corp. form an export cartel, PhosChem. It’s interesting that PhosChem was organized under the 1918 Webb-Pomerene Act that was intended to help small American businesses engage in collective export sales. It was a way for small firms to countervail the power of foreign governments.
But Cargill is the world’s largest privately held corporation, and Potash Corp is a Canadian company. Neither is “small” nor is Potash “American.” Yet they continue to be given antitrust immunity under the antiquated W-P Act. (For more on the potash cartel, see this recent New York Times article.)
Troubling, ain’t it?
But there is more. Canada sanctioned a potash export cartel, Canpotex, whose members are none other than Potash Corp. and Cargill, joined by Agrium. Agrium is the 6th largest fertilizer company in the world and, by the way, has small phosphorus holdings in the U.S.
The world’s potash reserves are primarily in Canada and the former Soviet Union. In the last few weeks, a Russian billionaire has been working on a deal to merge the two Russian potash companies, Uralaki and Silvinit, and the Belarusian company, Belaruskali. All of these mine potash. The reason given for merging these companies is “so they won’t have to compete with each other,” which “will be worth billions.”
In the last few weeks, BHP, Ltd, the world’s largest miner, made a hostile bid of $38.5 billion for Potash Corp. The Russian deal and the hostile takeover of Potash Corp., if they happen, will further consolidate mining and market power for basic natural resources.
Bottom line: World trade in potash fertilizer may be dominated by two entities, Canpotex, a Canadian cartel, and the conglomeration in the former USSR. World phosphorus trade is already dominated by PhosChem, a U.S. sanctioned cartel, and OCP, a Moroccan sanctioned monopoly.
Troubling, ain’t it!
Commercial agriculture, as practiced for the past 50 years, is not sustainable because it depends so heavily on diminishing supplies of fossil fuel and mined fertilizer. Furthermore, control of critical inputs to food production by a few giant transnational businesses and politically unstable governments is unacceptable. Monopoly is bad.
The countries of the world must begin meaningful discussion about what kind of food production system and food economy are best for humanity. Those with narrow political interests or the selfish few corporate executives and their puppets should not prevail in developing a new food system.
C. Robert Taylor is Alfa Eminent Scholar
and Professor of Agricultural Economics at Auburn University.