Morocco’s plan to re-enter the US fertilizer market gains momentum | 2022-07-12

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Moroccan phosphate giant OCP could get a major boost in its efforts to sell products in the U.S. phosphate market thanks to an upcoming Court of International Trade ruling, based on the tone of a court hearing last month. last.

A ruling by CIT Judge Stephen Vaden on whether the U.S. International Trade Commission was justified in ruling that imports of Moroccan phosphate fertilizers were harming domestic producers – a ruling that allowed the in place of crippling duties – is unlikely to be returned for at least a few months, but OCP executives and corn farmers are cautiously optimistic about the outcome.

The optimism stems from a day-long hearing late last month when Vaden, a former USDA general counsel in the Trump administration and a Tennessee native who grew up on his family’s farm, questioned the ITC lawyers defending the agency’s decision.

Company executives, however, say there could be tougher legal battles ahead in a campaign that has fertilizer-dependent farmers on their side.

“We believe that the ITC’s basis for injury (determination) was flawed,” said OCP North America CEO Kerry McNamara. Agri Pulse, “and it seems Judge Vaden might have seen some of the things the same way.”

“This week we saw results when a judge at the Court of International Trade started asking tough questions about the fertilizer companies‘ claims,” ​​National Corn Growers President Chris Edgington said after closing arguments. .

The ITC asserted emphatically in its final decision last year that a deluge of phosphates imported from Morocco and Russia from 2017 to 2020 had significantly harmed domestic producer Mosaic and that countervailing duties were warranted.

The Commerce Department calculated Morocco’s phosphorus level at around 20%, and OCP appealed it in a separate case before the Court of International Trade.

CIT Judge Stephen Vaden

The case was relatively simple, the ITC argued during the June 28 hearing that it was essentially a legal challenge against its injury ruling: an influx of imported Moroccan phosphorus fertilizers from 2017 to 2020 led to lower domestic prices, hurting Mosaic – the domestic producer that initiated the ITC investigation.

Imports increased their share of U.S. consumption, an ITC lawyer told Vaden during oral argument at the hearing, and they “did it at the direct expense of domestic industry.”

McNamara said the increase in imports was a direct result of increased demand, pointing to the fact that Mosaic ceased production in 2017 at its plant in Plant City, Florida. Mosaic, according to the ITC, permanently closed the facility in 2019 “because it was Florida’s costliest manufacturing plant and due to global phosphate market conditions.”

Mosaic, the ITC said, also temporarily reduced production at two facilities in Louisiana in 2019 “in response to an oversupply of phosphate fertilizers in the North American market caused by heavy rains that delayed the planting season. and because of excess imports”.

The United States imported about 2.8 million short tons of phosphorus from Morocco and Russia in 2017, 4 million in 2018 and 4 million in 2019, while prices fell and American producers like Mosaic suffered, concluded the ITC. The ITC investigated imports from Morocco and Russia, but only Morocco’s OCP appealed the decision.

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But Vaden was by no means satisfied, repeatedly asking why the ITC hadn’t given more consideration to all the factors surrounding the increase in imports.

“I guess your point is that whatever evidence they present, you can ignore it under the law if you think there’s only an increase for whatever reason,” Vaden said.

The ITC disagreed with this assessment, but the OCP strongly agreed. McNamara and Kevin Kimm, Chief Growth Officer of OCP North America, tell Agri Pulse that looking at the increase in the context of several different factors, imports were not to blame for the loss of revenue suffered by domestic phosphorus producers.

“Our view,” Kimm said, “is that (Vaden) was looking at the whole picture.”

And the picture at the time was bleak, both for the fertilizer industry and for farmers.

Historic flooding in early spring 2019 prevented farmers across much of the corn belt from planting that year. An analysis by the American Farm Bureau Federation showed that a record number of farmers have applied for compensation under the USDA’s Preventive Planting Program which makes payments to cover pre-planting expenses.

The USDA paid on 20 million acres that year, setting a new record that was more than double the previous record of less than 10 million in 2011, according to AFBF analysis.

The situation, OCP argued to Vaden, was totally unpredictable and import supplies were already on their way or arriving from Morocco to a market where demand was collapsing. So, yes, imports were strong and prices fell, but OCP argued that was not the company’s fault.

“What we’re saying, and (Vaden) seemed to be along the same lines, is if you have a demand slump that’s exogenous and the supply is greater than the slumped demand, that’s not a evidence of injury (by OCP) to domestic industry,” McNamara said.

Vaden appeared to be “going the same way” during the hearing. Playing ‘devil’s advocate’ during his ITC questioning, he said: ‘If you stock up in late 2018 and early 2019…when the bad weather came, the decision on how much you were going to buy would have was made three to six months earlier in the 2018 calendar year when no one knew the time was coming.

That being the case, he said, it would seem understandable that people would matter more.

Kimm and McNamara said they were happy with how the closing arguments went, but both stressed that even if Vaden found the ITC’s decision to be flawed and sent the case back to the agency, Mosaic would have the right to take it to US court. Calls for the Federal Circuit. The case could go all the way to the U.S. Supreme Court, McNamara said.

McNamara and Kimm say they hope it doesn’t come to that, but they’re also preparing for the second front of the legal battle. OCP’s second appeal, which will be before another judge at the Court of International Trade, challenges the Department of Commerce’s calculation of the 20% tax on Moroccan phosphorus fertilizers.

Kerry-McNamara-220x220.jpegKerry McNamara, OCP North America

The pleadings have not yet been scheduled for this hearing, but the OCP is preparing because the result could be substantial. If the judge decides the Commerce Department’s calculations were wrong, then it will be up to the Department to redo the calculation, which it would likely do at a time when domestic fertilizer prices are skyrocketing and farmers and lawmakers are calling loudly to stop impeding imports.

If Commerce were to lower the duty to less than 2%, that would be considered de minimis and the duty would be removed.

The situation is indeed bad for farmers when it comes to fertilizer prices, says David Franzen, professor and soil scientist at North Dakota State University. Farmers in his section of the Midwest paid between $1,200 and $1,400 a ton of monoammonium phosphate (MAP) in April and May to plant their spring crops, he said. That’s about double the normal price, Franzen said.

The prices, he said, “were as high as I’ve ever seen them.”

That caused farmers to withhold their demands, said Franzen, who added that he expected yields to fall as a result.

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