Great column, including: "But no strings were attached to this massive public subsidy to prevent taxpayer dollars from being siphoned away in a subsequent sale to a dominant competitor."
That a private company would avail itself of an inefficiency in a market created by an incompetency in government is not a crime and is to be expected at some point by some astute enterprise. And a willing seller contracting with a willing buyer is an absolutely essential feature of any functioning economy. If there is a villain here it is the dim bulbs at city, state and federal level giving away public subsides to perceived winners then left with their pants around their ankles. Their inability to pick these winners is perpetually remonstrated and it will be interesting to see how many more are lurking in our current renewable-energy, micro-chip, and infra-structure giveaways.
Thanks, Bob. I appreciate your comments. You're right, there's certainly no crime in an opportunistic purchase by a private company. It does concern me, though, that this private company has a huge presence in lobbying through its think tanks and advocacy groups, Americans for Prosperity, against "big government" and public subsidies aimed to help level the playing field. You're correct regarding the give-away by the former governor and legislators. And, as you point out, more example of this no doubt are on the horizon, including carbon capture.
An important issue that needs to be discussed. At the time we gave all of the cash to the Weaver Plant, the chemistry news pointed out that Iowa didn't need this plant and was subsidizing it way too much.
Thanks, Cathy. I'm unfamiliar with Chemistry News, so I appreciate your bringing it to our attention. I did include a quote from Iowa Farmers Union president, stating that this organization did not favor such huge public subsidies for a fertilizer plant. I think the goal was to add a plant in a quadrant of the state with high unemployment and weak economic development, AND dilute the concentration of the four largest players in the industry. It seems the outcome is an unintended consequence, but one that could have been foreseen.
It was Chemical and Engineering News. I'll see if I can find it on-line,. I read it in a print publication. But some of what they said is in this article. Basically, as a Senator in Iowa City pointed out, Branstad overpaid because he thought Illinois was going to beat him to the plant. But the article I read pointed out that Illinois already had a similar plant. The article somewhat panned Branstad and this made the issue stick with me.
I wish could find the article because it pointed out that Illinois already had a plant across the river and was unlikely to be competing and it made me aware of the absurdity of state's competing with each other.
This is a good analysis. I saw another story about this earlier and have been thinking about it since. I think that an important angle to this story that is not discussed is the detrimental effect of nitrogen on the water supply. It seems to me there is a significant overuse of nitrogen causing what economists call a negative externality. Essentially, the application of the nitrogen imposes costs on water users. Ask the Des Moines water utility about this. One of the usual policy solutions for a negative externality is to tax the good in order to reduce its use. Do you think Iowa or the US would tax nitrogen fertilizer? No. What does this have to do with your article? While I’m generally in favor of competition and antitrust policy, the paradoxical effect of monopoly power here is to increase the price of fertilizer and reduce its usage which is the result we would desire if we internalized its detrimental costs. Consequently, we might end up with cleaner water and more efficient use of nitrogen fertilizer!
One other thing, I’m a bit skeptical of the increased food cost assertion. First, half of the corn is used for ethanol rather than food and a lot of the corn has to go through a pig or cow or some other processing. Many of the paths of corn to consumer have multiple layers of low competition firms. I’d be interested in an analysis of whether the change in nitrogen prices will really affect consumers (and farmers) or whether it will result in the rearrangement of profits between monopolists.
Thank you, Jim, for your insightful comments. I did anticipate that this column might elicit responses prompted by legitimate concerns about over-application of nitrogen fertilizer. That is yet another entire column topic! I hear you regarding the negative outcomes of externalizing the costs of doing business, and I did write about this in Putting Profits Over People (March 4, 2023). In this column, I wanted to focus on the issue of concentrated food and ag markets, and the unfortunate misuse of public tax dollars that exacerbates this concentration. The case of the Iowa Fertilizer Company and Koch's purchase simply is the most recent and egregious example of this impacting Iowans. An analysis regarding the end result of nitrogen prices on consumer prices would be useful. High input costs do hurt farmers, discouraging the entry of young farmers and eroding the bottom lines of mid-sized farmers. As larger, fewer farmers dominate the agricultural landscape in Iowa and the U.S. I tend to believe that consumers ultimately will pay greater costs, both directly and indirectly. I hope that I am wrong.
This is my main concern also - terribly concerned about fertilizer polluting Iowas waterways!!!! Obviously, Branstad did not even give that a nod in early planning.
Thank you Cheryl. When will we as consumers and taxpayers ever be the ones to be protected? Regulations are to protect us, in cases like this. The Grassley. Ernst, Walker attempt is like you stated, probably too late. In all the years that Grassley has been in office, he has never moved forward true legislation to protect people.
Terrific column!
Great column, including: "But no strings were attached to this massive public subsidy to prevent taxpayer dollars from being siphoned away in a subsequent sale to a dominant competitor."
That a private company would avail itself of an inefficiency in a market created by an incompetency in government is not a crime and is to be expected at some point by some astute enterprise. And a willing seller contracting with a willing buyer is an absolutely essential feature of any functioning economy. If there is a villain here it is the dim bulbs at city, state and federal level giving away public subsides to perceived winners then left with their pants around their ankles. Their inability to pick these winners is perpetually remonstrated and it will be interesting to see how many more are lurking in our current renewable-energy, micro-chip, and infra-structure giveaways.
Thanks, Bob. I appreciate your comments. You're right, there's certainly no crime in an opportunistic purchase by a private company. It does concern me, though, that this private company has a huge presence in lobbying through its think tanks and advocacy groups, Americans for Prosperity, against "big government" and public subsidies aimed to help level the playing field. You're correct regarding the give-away by the former governor and legislators. And, as you point out, more example of this no doubt are on the horizon, including carbon capture.
Carbon capture has a lot of market opportunities because carbon dioxide is widely used in industry. It isn't all going to get buried by any means.
I believe that Branstad was the biggest dim bulb.
Good points all!
An important issue that needs to be discussed. At the time we gave all of the cash to the Weaver Plant, the chemistry news pointed out that Iowa didn't need this plant and was subsidizing it way too much.
Thanks, Cathy. I'm unfamiliar with Chemistry News, so I appreciate your bringing it to our attention. I did include a quote from Iowa Farmers Union president, stating that this organization did not favor such huge public subsidies for a fertilizer plant. I think the goal was to add a plant in a quadrant of the state with high unemployment and weak economic development, AND dilute the concentration of the four largest players in the industry. It seems the outcome is an unintended consequence, but one that could have been foreseen.
And in fact, were foreseen. https://cen.acs.org/articles/93/i39/Coming-Consolidation-Wave-Fertilizers.html?ref=search_results
Is chemistry news a formal publication? If so, I would be interested to see their critique.
It was Chemical and Engineering News. I'll see if I can find it on-line,. I read it in a print publication. But some of what they said is in this article. Basically, as a Senator in Iowa City pointed out, Branstad overpaid because he thought Illinois was going to beat him to the plant. But the article I read pointed out that Illinois already had a similar plant. The article somewhat panned Branstad and this made the issue stick with me.
https://www.fayobserver.com/story/news/2015/06/20/fertilizer-plant-gets-25-million/20183029007/
Thanks, Cathy! Yes, there was intense competition with Illinois. Would be interesting to know if this perceived competition was real.
I wish could find the article because it pointed out that Illinois already had a plant across the river and was unlikely to be competing and it made me aware of the absurdity of state's competing with each other.
This is a good analysis. I saw another story about this earlier and have been thinking about it since. I think that an important angle to this story that is not discussed is the detrimental effect of nitrogen on the water supply. It seems to me there is a significant overuse of nitrogen causing what economists call a negative externality. Essentially, the application of the nitrogen imposes costs on water users. Ask the Des Moines water utility about this. One of the usual policy solutions for a negative externality is to tax the good in order to reduce its use. Do you think Iowa or the US would tax nitrogen fertilizer? No. What does this have to do with your article? While I’m generally in favor of competition and antitrust policy, the paradoxical effect of monopoly power here is to increase the price of fertilizer and reduce its usage which is the result we would desire if we internalized its detrimental costs. Consequently, we might end up with cleaner water and more efficient use of nitrogen fertilizer!
One other thing, I’m a bit skeptical of the increased food cost assertion. First, half of the corn is used for ethanol rather than food and a lot of the corn has to go through a pig or cow or some other processing. Many of the paths of corn to consumer have multiple layers of low competition firms. I’d be interested in an analysis of whether the change in nitrogen prices will really affect consumers (and farmers) or whether it will result in the rearrangement of profits between monopolists.
Thank you, Jim, for your insightful comments. I did anticipate that this column might elicit responses prompted by legitimate concerns about over-application of nitrogen fertilizer. That is yet another entire column topic! I hear you regarding the negative outcomes of externalizing the costs of doing business, and I did write about this in Putting Profits Over People (March 4, 2023). In this column, I wanted to focus on the issue of concentrated food and ag markets, and the unfortunate misuse of public tax dollars that exacerbates this concentration. The case of the Iowa Fertilizer Company and Koch's purchase simply is the most recent and egregious example of this impacting Iowans. An analysis regarding the end result of nitrogen prices on consumer prices would be useful. High input costs do hurt farmers, discouraging the entry of young farmers and eroding the bottom lines of mid-sized farmers. As larger, fewer farmers dominate the agricultural landscape in Iowa and the U.S. I tend to believe that consumers ultimately will pay greater costs, both directly and indirectly. I hope that I am wrong.
This is my main concern also - terribly concerned about fertilizer polluting Iowas waterways!!!! Obviously, Branstad did not even give that a nod in early planning.
Lots of important thoughts to ponder. We might add the concerns about nitrous oxide in the atmosphere.....
Excellent points. Chris Jones’ book The Swine Republic is a must read on this topic.
Thanks, Devon. I do have this book, and he said it all!
Cheryl,, you've done it again - highlighted a major issue hiding in plain sight. You are terrific reporter, writer, and columnist.
Thank you Cheryl. When will we as consumers and taxpayers ever be the ones to be protected? Regulations are to protect us, in cases like this. The Grassley. Ernst, Walker attempt is like you stated, probably too late. In all the years that Grassley has been in office, he has never moved forward true legislation to protect people.
Sad, but true. Thanks, Denise!
Great reporting. Thank you!
Thank you!
I will be interested to hear what Senator Amy Klobuchar says about this deal. She is incredibly well-versed on antitrust matters.
Yes. Amy Klobuchar is excellent overall, and has great expertise in this arena!
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Monopolies are taking over far too many sectors of our economy. Thank you for highlighting yet another one.
Thank you, Kelcey. It's easy to sit back and think that this problem will work itself out.
Not so!
Thanks— I can search sometime too.
Great column.
Thank you, Bob! I appreciate your support.