HON. ED YOUNG, SOUTH CAROLINA FARM BUREAU, House Office Building, Washington, D.C. DEAR MR. YOUNG: Our Board of Directors and other farmers throughout the state are concerned over the possibility of a fertilizer shortage for 1974. We are attempting a survey based on stocks of raw material on hand plus the impact of exports on the domestic supply. Any information that your office could supply would be deeply appreciated. If there is an indication that supply will be short, we urge you to expend every effort to curtail the exporting of fertilizer ingredients to the point that an adequate supply will be available for our domestic needs. Your cooperation will be deeply appreciated. Sincerely, HARRY S. BELL, President. IDAHO CROPBUILDERS, INC., Wilder, Idaho, September 21, 1973. Congressman ORVAL HANSEN, Suite 312, Cannon Building, Washington, D.C. We need your attention and help on a very serious matter. The U.S. fertilizer industry needs attention immediately. Here is a brief outline of where we stand today. There is a severe fertilizer shortage, particularly nitrogen and phosphorous. It was felt this year, but next year will be much worse. The shortage of natural gas, a vital raw material in the manufacture of nitrogen, is contributing to the fertilizer shortage. This will undoubtedly get worse before it gets better. There is a rail car shortage which complicates the movement of fertilizers within the country to the agricultural areas that are in short supply. This, too, seems destined to get worse before it gets better. What caused the problem? All of a sudden it's hard to pin-point one specific cause, but there appears to be several contributing factors: (1) the price controls which discourage plant expansion for increased fertilizer manufacturing capacity (2) stepped up exportation of fertilizer products (3) no controls on prices at which fertilizer can be sold in the export market (4) the return to production of many acres of farm land which over the past number of years has been set aside. Some or all of the following things should be done to alleviate the situation as soon as possible: (1) establish an export quota limiting the amount of fertilizer that can be exported (2) remove all price controls on the domestic fertilizer market so that the American farmer can compete on an equal footing with the foreign customers (3) allowing the prices to go up according to the supply-demand formula will encourage plant expansion and increased fertilizer production (4) provide immediate incentive for increased fertilizer production, such as a high investment credit allowance up to 15 percent for new plant construction (5) provide some kind of relief for the transportation industry either through higher transportation rates or some other incentive to encourage satisfactory distribution. This fertilizer situation is critical and demands immediate action. Your consideration of the items set forth will be appreciated. Yours truly, IDAHO CROPBUILDERS, INC., STATEMENT OF HON. JOHN C. CULVER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA I welcome this opportunity to express my intense concern over the fertilizer situation and the distressing consequences in Iowa as well as in other parts of the nation of a critical fertilizer shortage. During the last year, most Americans have become acutely aware of the close correlation and interplay between U.S. agricultural productivity and the stability of food prices at the supermarket. As a result, there is now an energetic effort, reinforced by the new agricultural legislation adopted by the Congress, to encourage agricultural producers to expand their production of food and fiber during the next year. The looming threat of a shortage in fertilizer supplies poses one of the greatest threats to the success of this effort. A potential shortage of one million tons of nitrogen has been predicted for fiscal 1974. This shortage could result in significantly lower crop yields because of the reduction in nitrogen application rates. The consequences of this situation are obvious. Our efforts to increase the crop acreage under production may be counterbalanced by a reduction in the potential crop output per acre. Furthermore, many farmers who face favorable market prospects this year will be denied an essential tool in bringing about a successful harvest. The most serious and widespread impact will occur during spring planting next year. The expected shortage in fertilizer supplies is largely the result of both increased domestic and increased foreign demand. Most proposals advanced so far hinge on the removal of controls on domestic prices or on the placing of controls on exports. Either policy could have undesirable side effects and neither may offer a reliable long-term solution. In my judgment, imposing export controls would offer, at the very best, a solution of dubious merit. My principal objections to this action can be briefly summarized as follows: 1. Exports do not consume a very large portion of our production of fertilizer— as a result, export controls will not substantially increase available supplies; 2. The United States is both an exporter and an importer of fertilizer, so that export restrictions by this country could produce similar action by the nations from which we import fertilizer; 3. Blocking the trade in fertilizer would reduce the available supplies for the world market, further increasing foreign prices, and this would adversely affect the long-term situation; 4. Export controls will damage the U.S. efforts to reduce agricultural trade barriers in the coming trade talks ; 5. Placing embargos on agricultural products would set an ill-advised precedent at a time when we are seeking to expand trade of many other agricultural products. One step which could be taken at this time, short of export controls, is for the Secretary of the Treasury to discontinue the use of the Domestic International Sales Corporation by exporters of fertilizers. In a time of domestic scarcity, the government should not be granting financial incentives for the export of a product needed at home. A significant factor contributing to the short supply of fertilizer for domestic consumption is the price ceiling imposed on fertilizer by the Cost of Living Council. The present price differential between domestic and foreign prices, in some cases as much as $30 a ton, encourages exportation. Such a situation also discourages investment for needed expansion of domestic refining capacity. One solution to the current situation, therefore, would be to remove the existing controls on the price of fertilizer. While this would result in a higher fertilizer price to farmers, the projected 1974 crop prices and expected crop demand will make this additional expenditure financially justifiable. It has been suggested, however, that removing controls would probably not make much more fertilizer available for farmers during the coming season because a substantial portion of fertilizer export sales are already contracted. But the estimates on the extent to which supplies are tied up in export contracts vary widely. I would urge this committee and the Administration to fully investigate and consider this aspect of the problem before acting to remove the price controls. If it can be demonstrated that removing price controls would assure a significant increase in the domestic supply of fertilizer, this action ought to be taken as soon as possible. It must be recognized, however, that the long-term solution to the fertilizer situation is more complex than the temporary relief which may be provided by removing controls on prices. There are many other factors contributing to the current situation. The shortage of nitrogen, for example, derives not just from increased foreign sales due to higher foreign prices, but also from the jump in acreage under cultivation and the limited supply of natural gas. The shortage of natural gas limits production of anhydrous ammonia, the basic nitrogen product. While the first serious effect of the fertilizer shortage will be seen next spring, some experts believe a shortage will prevail during most of this decade. It is essential, therefore, that a long-range plan be developed now to meet this impending crisis. Because of the complexity of the problem and the wide range effects of general policies dealing with the situation, it may be necessary to establish a high-level, interagency task force to deal with the fertilizer situation. I am not suggesting another ineffective study commission, but rather a decision-making group with the power to take decisive action and set policies in this area which are responsive to the public interest. The following are a few examples of some of the matters such a task force might consider: The necessity, if any, of allocating fertilizer supplies in areas where a shortage is particularly acute. About 25 percent of nitrogen, for example, is now used in nonfarm activities, and a system of priority for use may become necessary in some areas of the country; The governmental action, if any, which may be needed to assure that independent fertilizer retailers are not forced out of business because major producers will not supply them, as has happened to some independent petroleum dealers during the fuel shortage; The policies which ought to be considered to encourage needed expansion and construction of nitrogen refining plants in this country (e.g. tax write-offs or other financial incentives) or possible construction of new plants in foreign areas, such as the Middle East, which could supply our market; The action which may be taken to alleviate the shortage of natural gas needed to refine nitrogen or to establish a high-priority of natural gas use for ammonia producers; The action government can take to encourage more importation of natural gas, such as international agreements like the one recently announced to import more natural gas into this country from the oil producing Arab nations; Any other proposal which will help to ensure an adequate supply of fertilizer at a reasonable price in the years ahead. Therefore, while removal of the price controls on domestic fertilizer products and of the DISC incentive on fertilizer exports may help to provide a short term solution to the fertilizer situation, it is imperative that intensive study be given to determine what action will be most effective in alleviating the ferilizer shortage in the coming years. The seriousness and the urgency of the situation must be recognized. The shortage will be most severe during next spring's planting and it could lead to higher food prices for consumers and lower income for farmers. The government must act before the full force of a crisis is upon us. COOPERATIVE EXTENSION SERVICE, Hon. QUENTIN BURDICK, U.S. Senate, U.S. Capitol Building, Washington, D.C. DEAR SENATOR: The Renville County Rural Development Program Committee held their regularly monthly meeting September 11. This committee consists of county SCS, ASCS, FHA and Extension Service representatives. One objective of our September meeting was to determine the present status of fertilizer supplies in Renville County. Mr. Oscar Stehr, Mohall Farmers Union Oil Company Manager, discussed this situation with the RDP Committee September 11th. It was determined that farm fertilizer orders at Mohall Farmers Union totalled 270 tons by September 11. Mr. Stehr has only 29 tons allotment for September distribution. Fertilizer shortages like these cause severe farm management problems for farmers in this county and fertilizer dealers as well. Situations like this, adversely affect the economy of rural towns like Mohall as well. Mr. Stehr and the RDP Committee feel several factors are causing this problem. Environmental Protection Agency (EPA) restrictions appear to be inhibiting full fertilizer production. Lack of definite EPA pollution standards tend to retard fertilizer plant improvement, remodeling, and new plant construction programs. Increased farm commodity prices, few acreage controls in the new farm program and increased foreign exports all increase fertilizer needs and contribute to the present severe fertilizer shortages. This committee feels a definite need to make the local situation known to pub lic officials. Any assistance you might be able to give to alleviate this situation would be very beneficial to all residents of Renville County. Sincerely, Hon. ELIGO DE LA GARZA, ALLAN CATTANACH, NATIONAL FARMERS UNION, Chairman, Subcommittee on Department Operations, House Agriculture Committee, 1301 Longworth House Office Building, Washington, D.C. DEAR CONGRESSMAN DE LA GARZA: I am taking this opportunity to relate to you some views of National Farmers Union on the fertilizer situation, on which you conducted hearings September 26 and October 3-4. The fertilizer situation is one of the most pressing problems affecting farmers now and during the 1973-74 crop year. The Department of Agriculture is projecting shortages of 1 million tons of nitrogen and 700,000 tons of phosphate this year. The shortage could be even larger, unless the proper steps are taken now. Removal of price controls on fertilizer is not the answer. If U.S. fertilizer plants are operating at full capacity, simple removal of price ceilings will not result in an expansion of production. Furthermore, to the extent that nitrogen and phosphates are already committed to export, narrowing of the differential between domestic and export prices now would not result in a larger proportion of U.S.-produced fertilizer for U.S. farm production. In any event, unless the price controls were removed entirely so that the domestic-export price gap was closed altogether, there would be no compelling motivation for fertilizer producers to give priority to domestic farm uses. Therefore, to the extent that some differential in price remained, the predominant result of relaxing price ceilings might be only to sanction excessive profit margins to the fertilizer production industry-which would carry over in the form of increased production costs to farmers for years to come. It appears to me that the most effective immediate action would be to assure total needs of the fertilizer industry for natural gas. Natural gas shortages held nitrogen production to a 2 percent increase during the fiscal year ending June 30, 1973, while usage of nitrogen fertilizer by farmers increased 5 percent during the same year. Natural gas is also essential for drying of phosphoric materials in the manufacture of phosphates. Accordingly, Farmers Union has recommended that natural gas, as a feedstock in the manufacture of nitrogen fertilizer, be included in a mandatory allocation program. We support the addition of natural gas, at least for this limited usage, in the legislation recently reported by the House Commerce Committee and shortly to be brought to the House and floor action. Less than one percent of total U.S. natural gas supplies are devoted to the production of nitrogen fertilizer annually. Anhydrous ammonia plants consume, as feedstocks, only some 22 percent of total natural gas supplies. If some ten percent of this amount had to be mandatorily allocated in order to keep ammonia plants at full capacity, this would necessitate rechannelling about one-fourth of one percent of total gas supplies through mandatory allocation. Consequently, although Farmers Union recognizes and appreciates the real demands for natural gas for home heating this winter, we are convinced that allocation of this small amount to fertilizer plants need not endanger essential uses for residential heating. The amount needed for fertilizer manufacture could be taken, to the extent necessary, from large industrial and other feedstock users without impinging upon residential needs. Allow me to commend you, Mr. Chairman, and your Subcommittee for holding these hearings at this critical time, and thus bringing the attention to this problem that it requires. I respectfully request that this communication be incorporated into the published record of the hearings conducted by your Subcommittee this week and last. Sincerely, TONY T. DECHANT. Hon. ELIGIO DE LA GARZA, AMERICAN FARM BUREAU FEDERATION, Chairman, Subcommittee on Department Operations, Committee on Agriculture, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: This is in response to your request of September 26 for our views on the present and growing shortage of fertilizer. Unfortunately, there is no single solution to this problem. Shortages of natural gas for industrial and home use have restricted its use for the manufacture of ammonium nitrate. Likewise, shortages of railroad cars and other transportation problems have distorted the distribution of some fertilizer products among the various regions of the country. As serious as these problems are, and as much as they have contributed to our present problems, no single action by our government has contributed more to the fertilizer problem than has the imposition of price controls. Among other things, price controls have encouraged exports and reduced imports of fertilizer materials. At the most recent annual meeting of the American Farm Bureau Federation, the official voting delegates representing the State Farm Bureaus adopted a policy which reads in part as follows: "Wage and price controls, while possibly effective as a temporary expedient to meet an emergency, can cripple the private enterprise system, which has made America strong, if they are enforced over an extended period. "We oppose extension of legislative authority for price and wage controls." We recognize that your Committee does not have jurisdiction over the legislation authorizing such controls; however, we urge you to bring this situation to the attention of your colleagues on the House Banking and Currency Committee to insure that authority for such controls is not extended next year. Likewise, we urge that your Committee join us and others in calling upon the Executive Branch of government to end price controls on fertilizer and fertilizer products immediately. We would appreciate it if you would make this letter a part of your hearing record. Thank you for your consideration. Sincerely, WILLIAM J. KUHFUSS, President. STATEMENT BY SOUTH TEXAS COTTON AND GRAIN ASSOCIATION, INC. The following statements are presented on behalf of the cotton and grain producers of the South Texas Cotton and Grain Association. Our organization includes twenty South Texas counties running primarily along the Texas Coastal Bend, and is supported financially by over 7,500 cotton and grain producers. This organization is in daily contact with producers throughout our area, and each day we receive reports of an inability to purchase fertilizer in the amounts necessary to produce a normal crop. The supply outlook is tight. Some retail outlets are being promised about 65% based on last year's sales. One of the major suppliers of our area is promising no fertilizer until January 1. It must be pointed out that the month of October is the starting time to make timely applications of fertilizer. Any condition that causes a delay in application or a restriction upon the required amount of fertilizer to be applied, will have a serious effect on production of cotton and grain in South Texas next year. The Department of Agriculture is calling for an all out effort for us to increase production of cotton, grain and other crops to meet the domestic need and the demand for these products overseas. This goal cannot be met in South Texas if the shortage of fertilizer persists. The reasons for being anxious to meet our goals in production are numerous and well known by this Committee. The results in not keeping our production up to normal will not be noticed immediately, but the long time effect will be noted on the table and in the budget of every Housewife in America. We must point out that Agriculture is playing a valuable part in solving the balance of payment deficit, and it is equally important to note that the fertilizer manufacturer must receive an adequate supply of fuel to produce the fertilizer required. |