USDA Supports Private Sector Expansion of Domestic Fertilizer Production through FPEP Grants

U.S. Agriculture Secretary Tom Vilsack recently announced that USDA is continuing to partner with America’s private sector to expand innovative domestic fertilizer production. The most recent announcement focused on the Department’s awarding $35 million for seven new projects in seven states through the?Fertilizer Production Expansion Program?(FPEP). This program provides grants to independent business owners to help them modernize equipment, adopt new technologies, and even build new production plants.?

WHY IS THIS IMPORTANT?

America’s farmers are squeezed at both ends of the food chain. At the front end, they face concentrated market power in the agricultural input industries—seed, fertilizer, feed, and equipment suppliers. At the back end, they face concentrated market power in the channels for selling agricultural products.

As a result, farmers' share of the value of their agricultural products has decreased. Similarly, poultry farmers, hog farmers, cattle ranchers, and other agricultural workers face challenges to retain autonomy and to make sustainable returns.

The escalating price of fertilizer has compounded these challenges. Fertilizer prices more than doubled between 2021 and 2022, due to external factors such as the ongoing war in Ukraine, as well as domestic factors such as a lack of competition in the fertilizer industry.?The fertilizer industry in the United States is competitive in terms of production costs and technology, but a small number of companies control the channels American farmers use to obtain fertilizer.?Two companies supply the vast majority of fertilizer potash in North America, while four companies supply 75 percent of U.S. nitrogen fertilizers. This can raise concerns about concentration and competition, especially as these companies also control scarce resources and critical production, transportation, and distribution channels.

WHAT’S BEING DONE:

The Fertilizer Product Expansion Program?was created in 2022, and is authorized by the CCC Charter Act, to assist agricultural producers through loans, purchases, payments, and other operations, and makes available materials and facilities required in the production and marketing of agricultural commodities. FPEP grants are administered by USDA through the Department’s Rural Development, Rural Business‐Cooperative Service (RBCS).?

To date, USDA has invested $286.6 million in 64 projects across 32 states through FPEP. These projects have created 768 new jobs in communities across the country and will increase domestic fertilizer production by over 5.6 million tons.

The seven states receiving today’s announced grants are California, Iowa, New York, Oregon, Tennessee, Virginia and Wisconsin. In announcing the grants, the Department highlighted several examples of the federal funding at work:

• Dramm Corp. in Wisconsin will use a $776,000 grant to increase their production capacity and expand their network of customers and farmers while reducing their carbon footprint and increasing employee safety. Using fish offal collected from commercial and sport fishermen, Dramm produces a liquid fish fertilizer suitable for organic and traditional farming while keeping millions of pounds of waste out of landfills and fresh waterways.
• AdvanSix in Virginia, an ammonium sulfate producer, will expand a facility with an almost $12 million grant. The company currently provides 31,400 ag producers with ammonium sulfate on the East Coast and in the Midwest. Through this project, AdvanSix will expand their operational capacity by 195,000 tons per year, increasing total production to more than 36,000 producers.

FPEP support fertilizer production that is:

1. Independent, and outside the orbit of dominant fertilizer suppliers. Because the program’s goal is to increase competition, market share restrictions apply.

2. Made in America. Products must be produced by companies operating in the U.S. or its territories, to create good-paying jobs at home, and reduce the reliance on potentially unstable, inconsistent foreign supplies.

3. Innovative.?Techniques will improve fertilizer production methods and efficient-use technologies to jumpstart the next generation of fertilizers and nutrient alternatives.

4. Sustainable. Ideally, products will reduce the greenhouse gas impact of transportation, production and use through renewable energy sources, feedstocks and formulations, incentivizing greater precision in fertilizer use.

5. Farmer-focused. Like other Commodity Credit Corporation investments, a driving factor is providing support and opportunities for U.S. agricultural commodity producers.

As the 2023 Farm Bill continues to work its way through the negotiating process, farmers will be watching to see if the fertilizer initiative receives additional appropriations.

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