The Changing U.S. Fertilizer Industry

Although it is relatively concentrated, the U.S. fertilizer industry appears to respond to demand and supply signals. But the speed of response has slowed because of escalated construction and energy costs and uncertainties regarding the availability of raw materials. Economies of scale have necessitated the construction of larger manufacturing facilities so that firms can be competitive. The effect, rather than the cause, has been an increase in concentration and integration and in barriers to entry. Manufacturing plant locations have become more oriented to inputs than to markets. Much of the newer nitrogen capacity is in the Gulf Coast States, close to natural gas supplies and to water transportation for both inland and coastal movements. Many new plants are being built as parts of multiproduct complexes, entailing considerable cost savings in coordinating the manufacture of several products at a single location. The United States is a net importer of potash, but at the minimum it is self-sufficient in nitrogen and phosphate. More than three-fourths of the potash used domestically in fertilizer is of Canadian origin, and nearly all of the North American potash reserves are in Canada.