When food prices rise, politicians and activists alike instinctively look for a villain to blame. Amid current instability, many will be tempted to settle on domestic manufacturers as the scapegoat for skyrocketing prices. However, this narrative might be politically convenient for some, but it gets the economics of global supply chains exactly backwards.
Global Disruptions and Government Policies
The real reason the price of key inputs in American food supply — like fertilizer — is rising is not corporate greed or mismanagement. It is a combination of global disruptions, geopolitical instability, and misguided government policies both here and abroad. All of these factors have come together to make it harder to produce the inputs on which American agriculture relies.
Fertilizer, for example, is one of the most important building blocks of the global food supply chain. Without it, crop yields fall. When crop yields fall, food production also declines, causing grocery bills to rise. Yet fertilizer does not appear out of thin air. It relies on a complex combination of materials such as sulfur, ammonia, and phosphate rock.
The ongoing war between Russia and Ukraine continues to disrupt key commodity markets and trade routes. Russia produced 7.5 million metric tons of sulfur last year, making it the third-largest producer in the world. This is because Russia is an oil-rich nation, and sulfur is a byproduct of oil refining. Lately, Ukrainian drone strikes on Russia’s oil and fertilizer infrastructure have drastically cut Russia’s ability to supply the world with sulfur. Russia’s ammonia exports have also fallen to roughly 80% below pre-war levels.
Addressing the Crisis
If policymakers want to lower prices for Americans, it would be a mistake to punish producers. The answer is to find ways to increase supply, relieving the pressure created by global uncertainty. This starts with eliminating policies that unnecessarily raise costs for domestic manufacturers. Permitting delays, burdensome regulations, and restrictions on energy development all make it more difficult to produce fertilizer in the U.S.
America has abundant resources and tremendous production capability. Policymakers should be doing everything possible to ensure American companies can source the raw materials they need right here at home. At the same time, policymakers need to be clear-eyed about misguided trade practices. Whenever possible, we need to source inputs from a variety of trusted partners, both foreign and domestic, to help meet our domestic demand.
Original reporting: Fox News (HLL/CB) — read the source article.
