Fair trade or free trade? Let your voice be heard on Minnesota’s future!
The Obama Administration is negotiating two new mega trade deals (one with Pacific Rim countries, another with Europe) entirely in secret, with the goal of further expanding the NAFTA-model of free trade. These trade agreements could have major impacts on Minnesota's farmers, workers, small business owners and rural communities. They could limit Minnesota’s ability to support local food and energy systems and grow local businesses. In order to stay up to speed, Minnesota has set up a new Trade Policy Advisory Council (TPAC) to advise the state legislature and Governor.
TPAC wants to hear from Minnesotans: What concerns do you have about free trade? What role could TPAC play in the future? Now is your opportunity to have a say in our future trade policy. Complete the survey and let them know future trade negotiations should be public, not secret. Help ensure the voices of all Minnesotans are heard in the development of trade agreements and that they protect local control and our quality of life. The free trade model has failed for Minnesota and we need a new approach to trade. Help ensure the voices of all Minnesotans are heard before trade agreements are completed, and that they protect local control, our natural resources and our quality of life.
Posted October 7, 2008 by
Costs for farmers around the world have gone through the roof
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—particularly for fertilizer. As the New York Times reported in April, rising fertilizer prices are limiting the production of farmers in developing countries trying to respond to the global food crisis. Is this just a case of tight supplies and growing demand, or is something else going on?
A class action lawsuit filed last month in Minneapolis alleges something else is going on: price-fixing. The lawsuit offers a fascinating behind-the-scenes look at the global fertilizer trade. A small Minnesota-based company, Minn-Chem Inc., charges that seven companies in the United States, Canada, Russia and Belarus conspired to fix global prices for the fertilizer potash.
Potash includes mineral and chemical salts that contain potassium, and is widely used around the world as a fertilizer to increase crop yields. Over half of the world’s global capacity is located in just two regions: Canada and the former Soviet Union (Russia and Belarus).
Three Canadian companies (PCS, Mosaic and Agrium) and three former Soviet Union producers (Uralkali, Belaruskali and Silvinit) account for approximately 71 percent of potash market exports, according to the lawsuit. The Canadian companies are equal shareholders in Canpotex, which unifies sales, marketing and distribution for the three companies. Companies in the former Soviet Union have consolidated sales and marketing of their potash into a single entity called BPC.
The complaint alleges a global conspiracy by this exclusive potash club of seven companies to fix, raise and stabilize prices; allocate market shares and limit production; and share sensitive, non-public information about prices, capacity and demand. It alleges that the companies coordinated restrictions in potash production in 2006, 2007 and 2008, which resulted in higher prices. North American potash prices rose 60 percent in 2004-2005 and essentially doubled in 2007 and 2008, according to the complaint.
And as prices rose, so did the profits of potash companies. PCS's second quarter 2008 profits increased by 220 percent over the previous year's second quarter. In October, Mosaic (partially owned by Cargill)
announced that its quarterly net earnings had quadrupled (according to the Minneapolis Star Tribune, Mosaic's recent earnings helped double the net worth of Cargill heirs Whitney MacMillan and Cargill MacMillan Jr. in the last year to $7 billion each). In August, Agrium announced that its second quarter earnings had more than doubled from the previous year. Net profits for Uralkali for the first half of 2008 more than tripled from the previous year.
The fertilizer industry, represented through the Fertilizer Institute, argues that increasing prices from all types of fertilizers is simply supply and demand at work. And certainly demand has increased as acres have expanded for highly fertilized crops like corn, soybeans and wheat to meet growing demand for food, animal feed and fuel.
But the claims of tight supplies seem to run counter to a UN Food and Agriculture report earlier this year that concluded, in the case of potash, “Global potash supplies are expected to keep well ahead of total demand with the surplus increasing from 5.7 to 6.7 million tonnes at an annual growth rate of 3% over the outlook period. During this period the surplus will fluctuate little at about 18% of demand.”
An October 2 story in the Minneapolis Star Tribune by Chris Serres went further: "In the eyes of many farmers and agriculture experts, fertilizer prices have seemed to defy the normal laws of economics." Serres reported that while prices have skyrocketed, Mosaic announced it has an over-supply of phosphate and potash and is cutting production. Bob Zelanka, of the Minnesota Grain and Feed Association, told the Star Tribune, "It certainly does have the feel like they're controlling the supply to drive up the price."
Recent price increases all along the food chain are drawing the attention of regulators. According to the Wall Street Journal's John Wilke, the U.S. Justice Department confirmed it has opened investigations into price fixing in the tomato, egg and citrus-fruit industries, and "federal agencies are pursuing criminal or civil inquiries in markets including fertilizer, cheese and milk."
We may never know the real role of market collusion in the current food crisis, but we should sure try to find out.