Iowa’s $3 billion nitrogen fertilizer plant a “transformative moment” for the US agriculture industry
June 1, 2017
The first world-scale greenfield nitrogen fertilizer facility to be constructed in the U.S. in more than 25 years opened in April in Iowa.
Iowans welcomed the project, as it stands to be one of the largest private-sector construction projects in Iowa's history. But more than that, the plant holds promise for the agriculture industry and farmers, too.
Iowa Fertilizer kick-started nitrogen production at the plant located in southeastern Iowa in the town of Wever, which is in Lee County. The plant is pegged to produce an estimated 1.5 to 2 million metric tons of nitrogen fertilizer products each year. It also will be able to alternate between products at a moment's notice, pending market demand, company officials said.
Nassef Sawiris, CEO of the Wever plant's parent company, OCI N.V., said the plant is a "transformative moment" for the agriculture industry.
“In the years to come, this plant will continue to spur job growth for Iowa families and support our farmers by providing a more accessible source of fertilizer for their crops.”
"As one of the most innovative and efficient manufacturing plants in the nation, Iowa Fertilizer is leading the way in providing American farmers a stable, high-quality and domestic source of nitrogen fertilizer products. Given its location among the highest nitrogen-consuming acres globally, on the border between Iowa and Illinois, the No. 1 and No. 2 corn-producing states in the nation, the site houses not only a premier production facility, but also an industry-leading distribution center," Sawiris said.
The plant also has an economic impact locally, employing more than 200 full-time employees to operate the facility. Additional positions are expected to be added as time goes on. The plant was four years in the making and cost $3 billion to construct. The state of Iowa provided almost $108 million in state tax credits, while regional and federal incentives gave the project a financial boost.
Former Iowa Gov. Terry Branstad pointed out at the plant's ribbon cutting that the unemployment rate in Lee County where the plant is located was the highest in the state at 8 percent. Now, the county's unemployment rate has dropped three points to 5.3 percent thanks to the plant.
Iowa's former lieutenant governor who is now the sitting governor, Kim Reynolds, said the plant will continue to benefit the southeast corner of Iowa and producers across the Midwest.
"In the years to come, this plant will continue to spur job growth for Iowa families and support our farmers by providing a more accessible source of fertilizer for their crops," she said.
Anton Bekkerman, an economy professor with the Montana State University Department of Agriculture and Resource Economics, said the ag industry has heralded the new plant after the farm scene hasn't proven a need for one — until now.
"In the '70s and '80s, there was a fairly high increase in natural gas prices at the same time commodity prices were quite low. That combination of high input costs for fertilizer production and low commodity prices resulted in a lot of fertilizer processing plants either going out of business or opting not to expand or build new facilities," Bekkerman said. "However, that led to an increasing dependence by U.S. producers on imported fertilizer."
In fact, until the plant opened, up to 40 percent of urea has been imported. Outside factors also have influenced the cost of fertilizer.
"We've become a lot more dependent upon what happens politically and on transportation costs. The U.S. farm industry has become more dependent upon what happens elsewhere in the world," Bekkerman said. "Most of these imports are being brought into just a few locations with the major area being New Orleans and Houston, and some on Long Island, the Portland area and the Norfolk location. Since most ag crops needing fertilizer aren't produced on those coasts, that fertilizer has to be transported to the Midwest, which makes the industry and producers dependent upon what's occurring on the Mississippi River, with trucking and the rails, and that subsequently increases the cost of fertilizer for farmers."
In 2011, there was a significant technological advancement regarding fracking, which also resulted in an influx of natural gas supplies in the U.S. Bekkerman anticipated natural gas prices dropping because of that — and they did, which is a boon to producers.
"Those prices dropped precipitously and we thought we'd see a similar decrease in fertilizer costs, but we haven't, and that's because the fertilizer processing and production in the U.S. hasn't been able to catch up with using natural gas to produce the fertilizer. Now, you're seeing the domestic fertilizer industry starting to catch up and point out the low input costs by using natural gas and start making more themselves domestically instead of importing," he said.
Because of that, Bekkerman said the ag industry just might see more fertilizer plants open in the coming years, even though there are a number of barriers and regulatory constraints influencing that.
"It just makes sense to have a major input in fertilizer production produced in the heart of row crop agriculture. I think farmers will see in the next five to 10 years the low natural gas prices spilling over into lower fertilizer prices, since production is expanding and they won't be paying for transportation costs for imported fertilizer," Bekkerman said. "We might even see exports of domestically produced fertilizer if the natural gas prices are low enough and there's enough expansion."
For more information on Iowa Fertilizer visit their website at https://iowafertilizer.com ❖
— Danley-Greiner has spent more than 20 years as a journalist covering local, state and national issues important to agriculture and those dedicated to farming.