Latest / Closing Market Report / CMR | Consolidation in the Fertilizer Industry
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- cmr260603 This episode of the Closing Market Report examines long-term consolidation trends within the U.S. agricultural sector. Henrique Monaco details findings from a farmdoc daily article on the U.S. nitrogen fertilizer industry, explaining that high concentration—with the top four companies controlling 70% of domestic ammonia production capacity—is the expected result of cost-based competition in a mature commodity market, rather than a reaction to recent geopolitical supply shocks. Agricultural economist Jim MacDonald expands on this theme by outlining parallel consolidation at the farm level. Utilizing a 2,000-acre threshold to ensure consistent tracking devoid of inflation-related distortion, MacDonald notes that large operations expanded their share of U.S. cropland from 15% in 1987 to 41% by 2017. Both experts underscore that economies of scale and cost efficiency remain the primary catalysts for industry consolidation, from input manufacturing to farm-level crop production. - Henrique Monaco, farmdoc Researcher - University of Illinois - Jim MacDonald, Agricultural Economist - University of Maryland [farmdoc Daily Article](https://farmdocdaily.illinois.edu/2026/05/consolidation-trends-in-the-us-nitrogen-fertilizer-industry.html) Todd Gleason: From the Land Grant University in Urbana-Champaign, Illinois, this is the Closing Market Report. I'm Illinois Extension's Todd Gleason. I am away from the office this afternoon, so there is no update on the commodity markets. However, we will go through a farmdoc daily article about the consolidation within the fertilizer industry, how that trails back through what is a bit fragmented on the retailer side, and consolidation within farm sizes across the United States, particularly in row crops. We will do that with Henrique Monaco, who is the lead author for an article posted to the farmdoc daily website, and then a researcher referenced in that article, Jim MacDonald, an agricultural economist at the University of Maryland. He will help us explore how big a large farm is in the United States, at least as it relates to row crops and livestock. The number is small compared to what you might think a large farm is: 2,000 acres. That means the people sitting next to you in the pew at church, or going to school with your kids, that you know and think of as just a farmer in the US—by the stats, they operate a large farm. That has some complications related to consumers, farmers, and policies developed in Washington, D.C. We won't talk about those today, but probably will take them up in future editions of the Closing Market Report. Stay with us. I think you should find it an interesting conversation. announce: Todd Gleason's services are made available to WILL by University of Illinois Extension. 01:49 Consolidation Trends in the U.S. Nitrogen Fertilizer Industry Todd Gleason: We are now joined by Henrique Monaco. He, along with Nick Paulson, Gary Schnitkey, and Carl Zulauf, penned an article for the farmdoc daily website titled "Consolidation Trends in the US Nitrogen Fertilizer Industry." Henrique, thank you for joining us. I know this was put together in response to the Strait of Hormuz and the large increase in the price of nitrogen across the planet and in the United States, although fertilizer prices had been moving up to begin with. I suppose part of the thought behind this article is that consolidation may be the devil behind that increase. Am I correct that this is where you started from when looking at the fertilizer industry? Henrique Monaco: For economists, when you look at the fertilizer industry more broadly or other ag inputs, the consolidation is there. It is nothing that started right now with the Strait of Hormuz. Once you have a shock like that on prices, you start reevaluating things. To your point, it is not specifically this shock that happened to fertilizer prices; this is not a consolidation issue. The consolidation, specifically here in the US in the nitrogen industry, has been happening since the mid-2000s. It is nothing that started right now with the conflict. Todd Gleason: Let's lay out fertilizer in the US to begin with, and then talk a little bit about the industry, domestic production, and what consumption looks like here. How much of the total global fertilizer footprint does the US consume? Henrique Monaco: That is about 10% or 15% of global fertilizer consumption. Todd Gleason: When you break it out by N, P, and K—nitrogen, phosphorus, and potassium—how reliant is the US on itself or imports from other countries? Henrique Monaco: That presents a very different picture depending on the nutrient. For potassium specifically, the import reliance is very high, and Canada is the main partner. When it comes to phosphate and nitrogen, those numbers are much lower: 13% and 6%. That means the US has a good domestic production capacity. Let's bring it back to nitrogen here; it has a good domestic production capacity in terms of ammonia production, which is used for other nitrogen products as well. Todd Gleason: There is a graphic in the farmdoc daily article that shows nitrogen production capacity and utilization. I thought it was fairly interesting that the capacity within the nation in the early 2000s was about what it is today, but there was a sharp drop in the mid-2000s, around 2009 and 2010. Do we know why that took place? Henrique Monaco: Natural gas is the main input for nitrogen fertilizer production. Primarily, high prices made in-house production more expensive, so the industry contracted a little bit. After that 2009 to 2012 period, natural gas prices started to decrease, which encouraged production again. Natural gas input prices were the main driver there. Todd Gleason: Natural gas was driving the reduction in total capacity. At that same time frame, from the 2000s to today, with that dip in the middle, there was consolidation within the industry. Can you tell me about the share of the industry, who controls it now, and how that has changed over time? Henrique Monaco: Since 2000, there was a decrease in the total number of firms and operating plants. When it comes to who has the ammonia production capacity in the US, that would primarily be CF Industries and Nutrien. Those top two together account for roughly 55% to 60%. The top four companies account for 70% of ammonia production capacity. That is not necessarily market share, but it is one indicator. Todd Gleason: As it relates to consolidation in the industry, are there so few players that the Department of Justice would be interested in looking at them? Henrique Monaco: I think there is always an interest in looking at them. The Department of Justice has a merger guideline calculation, the Herfindahl-Hirschman Index, which measures how consolidated an industry is. They have a cutoff above 0.18 to be considered highly concentrated. That would be the case for the fertilizer industry now. However, you have to put that in a broader context when evaluating it. This guideline was updated in 2023. Under the previous guideline, it would not be considered highly concentrated. Todd Gleason: The integration across the board from the farm to the manufacturer of these fertilizers has changed over that time as well. For instance, you write about the retailers. Consolidation has happened there, too. Henrique Monaco: When you look at the fertilizer industry, we think about manufacturers, retail, and then farmers using it. We have data on the manufacturers to look at this consolidation index. The retail market is something we don't have a lot of data on, so that is a gap in analyzing it. We do know big players like Nutrien have a large footprint in retail; according to them, they own 21% of the US ag retail industry. While it might be there, there is not a ton of data available for us to analyze that segment of the supply chain. Todd Gleason: This leads me to one of your conclusions, which is that consolidation is just a natural outcome of a mature industry. Henrique Monaco: When you think about the fertilizer industry, products from one company or another are essentially a commodity fertilizer with very little differentiation. It is primarily a cost play. If you have lower costs, you have a competitive advantage. Over time, in a mature industry, it sorts out the inefficient operations; the low-cost ones survive and absorb the high-cost ones. In a commodity industry where competition is based on the cost of production, consolidation is expected as one of the outcomes. Todd Gleason: So there are fewer players as manufacturers, there are fewer players as retailers, and it appears from the numbers there are fewer and larger players on the farm side, too. Henrique Monaco: On the manufacturing side, we do have fewer players. Retail is blurred because we don't have a ton of data, but at the farm level, that is a well-documented trend. Since 1987, large farms—in this case, operations with 2,000 or more acres in crops—were responsible for operating 15% of US cropland. That number rose to 41% by 2017. Farming shares characteristics with the fertilizer industry: it is a commodity, and farmers compete on cost. Those with a cost advantage make a profit. Economies of scale are a big factor in cutting costs, and farmers with that advantage incorporate the less efficient ones. 13:35 Consolidation in U.S. Agriculture and Farm Sizes Todd Gleason: That was Henrique Monaco. I spoke with him about an article he posted to the farmdoc daily website, titled "Consolidation Trends in the US Nitrogen Fertilizer Industry." One of the references in that article was regarding consolidation in US agriculture and farm sizes, researched by Jim MacDonald, an agricultural economist now at the University of Maryland. He framed a large-sized row crop farm as 2,000 acres—a USDA-generated category. Generally, large farms are categorized by $300,000 in gross revenue. I called Jim at the University of Maryland and asked him why he used that acreage number. Jim MacDonald: For one thing, if we're doing sales—and I have done a good deal of work using sales and dollar numbers—you have to be able to adjust for inflation. That is really tricky in agriculture because you get different rates of inflation for different crops. With acreage, you don't have the inflation problem. We also know that consolidation for almost all crops has taken the form of shifts toward fewer, but much larger farms. This allows us to track consistent data across states, counties, and commodities over a long period. When I was at the Economic Research Service, I was involved in running an annual large-scale farm survey drawn from the five-year census of agriculture. By digging into the confidential farm-level records, we built up a summary of consolidation changes for crops and livestock going back to the early 1980s. Todd Gleason: In 1987, large farms were responsible for operating 15% of all US cropland, compared to 41% by 2017. Why use 2,000 acres to define a large farm? In 1987, grain farmers might agree that was big, but today they probably would not. Jim MacDonald: The public data that we report for USDA generally has cutoffs of 2,000 and 5,000 acres. I wanted to keep consistent with the public data. As you pointed out, initially there weren't many acres in the 2,000-and-above category. By 2017, around 40% of all cropland acres in the United States were in farms of at least 2,000 acres, and that has probably grown since then. We did draw out much larger operations—crop farms with 5,000, 10,000, up to 25,000 acres. We saw a corresponding large shift of acreage toward the 2,000 to 5,000 and the 5,000 to 10,000 categories. We didn't see much of a shift in farms of 25,000 acres or more, but we did see a significant shift of acreage into the 2,000 to 25,000-acre range. Todd Gleason: When will you start work on the most recent census data? Jim MacDonald: I would have liked to have had it done by now. I make a data request to the National Agricultural Statistics Service (NASS) at USDA, which runs the census of agriculture. NASS has tightened its review requirements and has a smaller staff than it used to, so it is going to take longer. I expect to get my data request fulfilled by the end of this summer or early fall. My intention is to turn that around quickly, so I should have good information by the end of 2026. I'll be speaking with the Economic Research Service, who I still work with, as to how we want to publish that information. We're working on the 2022 census now, much later than I would have hoped. Todd Gleason: Is your inclination to include the higher farm size limits? Jim MacDonald: Yes. I need to discuss that with my co-authors at ERS. I have some technical issues with how NASS reports really large farms. For the very large operations—25,000 acres and above—I'm not confident whether I'm seeing one large, integrated farming business or combined places that have multiple farms across states. I want to have good confidence before I write about the very largest farms. We are likely to push the data into the 2,000 to 5,000, 5,000 to 10,000, and 10,000-and-above categories if we are technically able to do it. Todd Gleason: Good luck, and thank you. Hopefully, I'll check in with you to see how the work progresses. Jim MacDonald: Sure thing. Todd Gleason: Jim MacDonald is an agricultural economist at the University of Maryland. I spoke with him about the size of farms in the United States, particularly what is categorized as a large farm: 2,000 acres and above. Most farmers wouldn't consider that a particularly large farm in the Corn Belt or across the United States. We also discussed consolidation within the fertilizer industry with Henrique Monaco, which spurred the conversation with Jim. Altogether, it is important as it relates to how consumers view farms and the policies Washington D.C. designs for them. You've been listening to the Closing Market Report from Illinois Extension. I'm Todd Gleason.