Tue. Jul 5th, 2022

Rana Foroohar (Opinion, March 28) argues that rising fertilizer prices, as a primary input to primary food crops, will drive the cost of food production higher. The US Department of Agriculture food dollar series tells us that agribusiness (the line item for seeds and chemicals) accounts for only 2.8 cents of each dollar spent on food. If fertilizer is a fraction of a small fraction spent on food, how inflationary could fertilizer price increases really be?

Her main argument is not so much about Russia’s now more costly supply of phosphate but of the opportunism inherent to corporate agribusiness oligopolists. With a significant share

of global fertilizer supply now offline, “farmers say price gouging is part of the problem”. More market power per manufacturer should imply higher margins. In any case, it is “local for local” which is government support for smaller manufacturers that has me scratching my head. From Paul Volcker (who famously tamed the last round of scary inflation expectations) onward, central bankers tend to absorb the credit for decades of price stability.

What is lost in the conversation about inflation is the economies of scale that have driven costs down to their foundation. While fertilizer markets have spiked, there has been a downward trend in real prices since the 1980s. Concentrated or big market power has done more than anything to suppress costs. If productivity growth is missing from GDP accounts, it is found in any real price chart. The bigger the factory, the lower the cost per pound. Antitrust action may be valid if precisely aimed, but let’s not “runoff” with small scale ideas.

Daniel Plant
President, Plant Dynamics
New Haven, CT, US

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