Farmers Brace for Rising Fertilizer Costs Amid North American Trade War

 

With spring planting just weeks away, farmers in Canada and the United States are facing yet another economic challenge: soaring fertilizer costs driven by an ongoing trade dispute between the two nations. Already struggling with low grain prices, these farmers now have to navigate the consequences of newly imposed tariffs that threaten to drive up input costs even further.

Rising Costs Due to Trade Tensions

Trade tensions between the U.S. and Canada have already pushed up prices for some farming supplies. U.S. President Donald Trump enacted 25% tariffs on most Canadian products on a recent Tuesday, only to announce a temporary one-month reprieve on certain goods, including fertilizers, just two days later. In response, Canada decided to delay its planned second round of retaliatory tariffs until April 2.

Fertilizer is a crucial input for farmers on both sides of the border. U.S. farmers frequently use potash fertilizer, which is largely sourced from Saskatchewan, Canada. Meanwhile, Canadian farmers rely on phosphate fertilizer, much of which is imported from Florida. As trade tensions continue, both industries are feeling the squeeze.

Concerns Among Farmers

Scott Hepworth, a Saskatchewan farmer who depends on U.S. phosphate fertilizer for his canola and wheat fields, is among those deeply concerned about the impact of rising costs.

"When will this end? How bad will this get?" Hepworth questioned while attending the Canadian Crops Convention on March 5.

For many farmers, fertilizer is their largest input cost. In 2024, the U.S. Department of Agriculture estimated that fertilizer expenses accounted for 22% of total corn production costs, including labor, machinery, and overhead. Since the beginning of the year, the price of potash has surged from $303 per short ton on January 3 to $348 by February 28, largely in response to tariff concerns.

"Potash has seen price strength in all the confusion and fear of the tariffs," explained Josh Linville, a fertilizer analyst at StoneX. "There were strong fundamental reasons for potash prices to rise, but it was the tariff fears that eventually caught up with it."

Phosphate prices have been even harder to estimate, as natural disasters, including hurricanes in Florida, have disrupted supply chains. Analysts warn that further Canadian retaliatory tariffs could further escalate phosphate prices.

The Impact of Tariffs on Supply and Pricing

The U.S. currently imports 90% of its potash, with 80% of those imports coming from Canada. Domestic production is insufficient to replace the Canadian supply. A University of Illinois and Ohio State University analysis from February 4 suggested that the full pass-through of a 25% tariff could raise prices by more than $100 per ton for Canadian potash imports. For farmers, who operate on tight margins, such cost increases could significantly impact their profitability.

While other potash suppliers, such as Russia and Belarus, exist, their export capabilities have been hampered by sanctions and logistical challenges due to the war in Ukraine. Likewise, Canada imports phosphate primarily from the U.S., with alternative suppliers like Morocco posing logistical challenges due to distance. If Canada imposes tariffs on U.S. phosphate, Canadian farmers could face higher costs as well.

Short-Term Solutions and Future Outlook

Anticipating the tariffs, Canadian fertilizer companies rushed to ship potash supplies to U.S. wholesalers before the new duties took effect. Analysts suggest that U.S. farmers should have enough supply for early spring planting, but they will likely have to pay significantly higher prices to retailers.

"The fertilizer industry has known this is coming since November, so they’ve been prepared, and now they’re just bracing to see how this plays out," said Mark Milam, an analyst at ICIS, a commodity analytics firm.

Ken Seitz, President and CEO of Nutrien (NYSE:NTR), cautioned that U.S. farmers should be prepared for fertilizer prices to rise by as much as 25%.

"We believe that the cost of tariffs will be passed on to the U.S. farmer," Seitz stated at the BMO Global Metals, Mining, and Critical Minerals Conference on February 25.

Conclusion

As the trade war continues, North American farmers face uncertainty and mounting costs that threaten their financial stability. With no clear resolution in sight, the industry will be closely watching developments in trade negotiations while seeking alternative strategies to mitigate the economic impact of rising fertilizer prices.