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1975/12/30 - Economic Policy Board
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1975/12/30 - Economic Policy Board
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The original documents are located in Box 54, folder "1975/12/30 - Economic Policy Board"
of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 54 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE MEETING
AGENDA
8:30 a.m.
Roosevelt Room
December 29, 1975
1. Report on Conference on International
Robinson
Economic Cooperation
2.
Report of Interagency Fertilizer Task
Ahalt
Force
FORD is LIBRARY GERALD
12/23/75
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE
Proposed Agenda
Monday, December 29, 1975
1. Report on Conference on International Economic
Robinson
Cooperation
2. Report of Interagency Fertilizer Task Force
Ahalt
Tuesday, December 30, 1975 (Principals only)
1. Tax policy
Treasury
Special Session on Tax Policy (Principals only)
Treasury
Roosevelt Room 5:45 p.m.
Wednesday, December 31, 1975
No EPB Executive Committee meeting
Thursday, January 1, 1976
No EPB Executive Committee meeting
Friday, January 2, 1976
1. Tax policy
Treasury
FORD & LIBRARY
UNITEDSITY DEPARTMENTOR
DEPARTMENT OF AC RICULTURE
OFFICE OF THE SE RETARY
WASHINGTON. D. C. 20250
December 23, 1975
MEMORANDUM FOR: EXECUTIVE COMMITTEE -- EPB
SUBJECT: Fertilizer Report
Attached is a status report from the Interagency Fertilizer Task
Force.
The current fertilizer situation remains basically unchanged
from that reported in November. Inventories continue to build
up and prices are falling further. The mild winter has
substantially reduced natural gas curtailments from earlier
expectations. One large ammonia plant has contracted additional
gas through the new FPC procedures.
TAB A - Fertilizer Statistics
The attached tentative report summarizes findings of the Sub-
committee on Statistics. Principal problem areas identified
include lack of complete coverage on inventories, the need to
adjust data collection procedures consistent with present
industry practices, and the lack of sufficient coordination in
the collection and dissemination of information. Further review
and evaluation are underway. A set of recommendations will be
forthcoming at the end of March.
TAB B - Saskatchewan Potash Situation
The threat of nationalization of the potash industry by the
Saskatchewan Province continues. The U.S. Embassy in Ottawa
has laid hard questions on the Canadian Federal government
regarding its posture on this problem. The Canadian government
has not yet responded.
J. DAWSON AHALT Ahalr
Chairman, Interagency
Fertilizer Task Force
TAB A
TAB A
Fertilizer Statistics Status Report
A subgroup of the Interagency Task Force on Fertilizer has been formed
to evaluate the present information system on fertilizer and where
feasible make recommendations for improvement. Below is a tentative
summary of some of the major problem areas.
Background
The existing fertilizer information system has evolved over a number of
years. Presently, the collection and reporting of statistics on capacity,
production, inventories, use, trade and prices of fertilizer are fragmented
among 10 Federal departments and agencies. Two private trade associations
also gather various data on fertilizer. The collection and dissemination of
fertilizer statistics are not unlike that for other commodities and for the
most part the system compares reasonably well with that for other industries.
However, fertilizer is an important input produced in the industrial
sector primarily for agricultural use (figure 1). Hence, there is a wide
diversity of interests among users regarding various aspects of the supply-
demand and pricing of fertilizer.
The present system appears to have developed largely over time in response
to problems and constituency needs placed on various Federal agencies,
rather than for appraising the overall fertilizer situation. Accordingly,
there are problems of incomplete coverage in some important areas, timing
problems in the collection and dissemination of other statistics and
obsolete procedures in some segments of the system.
Specific Problem Areas
Inventory Statistics
A major limitation of the information system springs from the incomplete
coverage of inventory data. Currently, the only measure of inventories is
at the producer level (even so because urea statistics are collected by
a separate agency, producer inventories for this important source of
nitrogen are unavailable). During normal periods, the volume of fertilizer
stored at various points in distribution channels is not a major problem.
However, where sudden shifts in supply or demand occur, this lack of
information becomes a major shortcoming in the ability to appraise the
supply picture. Some experts believe that the volume of inventories at
wholesale and retail levels at times may exceed that held at producer levels.
Moreover, the variation in stocks in the entire production and distribution
system is believed to range from as little as a fifth to as much as 100
percent of annual sales at any given point in time. Under the present
system, nonproducer held inventories are shown as a residual along with
other miscellaneous categories in the supply and distribution balance
sheet (table 1). At this stage in the review, it appears that the one
feasible approach would be to sample retailers on the inventories possibly
at the time prices of fertilizers are collected.
- 2 -
Production Data
Production data are collected regularly on raw materials such as phosphate
rock, sulfur, potassium chloride as well as manufactured products such as
anhydrous ammonia and various phosphatic fertilizers (Raw materials and
manufactured products are collected by separate agencies.). Parts of this
program, however, have become obsolete over time. For example, within the
past 5 years, wet-process phosphoric acid used in making fertilizer by
intermediate producers and retail dealers has accelerated sharply.
Unfortunately, this information is not presently collected. This system
needs further review in order to broaden coverage consistent with current
day needs and to consider other changes where appropriate.
End Use
USDA currently collects data on total fertilizer consumption. The amount
of fertilizer used on four major crops--corn, wheat, soybeans, and cotton--
is reported separately. These four crops account for 50-55 percent of
total fertilizer use in the U.S. However, virtually no information exists
to accurately estimate the amount of fertilizer used off the farm. More-
over, since the Tariff Commission's responsibility on collecting urea
statistics predated this material's important use as a fertilizer, the
amount of urea used as plant food is not collected. The feasibility of
obtaining data for this purpose is under review.
Prices
Statistics on fertilizer prices are collected by the U.S. Departments of
Labor and Agriculture. The Labor Department series collected by BLS
measures prices monthly at wholesale levels. Recently, this series altered
collection points from secondary to primary sources. Still these prices
remain basically list quotes rather than actual transaction prices. In
USDA, the Statistical Reporting Service semiannually collects retail
prices for fertilizer (prices paid by farmers.) Generally, these are
"listed" retail prices and may not reflect special deals, etc. Efforts are
underway to try to adjust collection from a semiannual to a quarterly
basis.
Coordination
With many agencies involved in collecting and disseminating statistics,
it is difficult to coordinate and pull the information together regularly
in a meaningful fashion. Several reports are issued periodically that
attempt to summarize the overall situation, but because of the sharp
swings in fertilizer markets in recent years the existing system does not
adequately pull together timely information on major developments.
There is widespread support for a document that would summarize the
principal statistics and provide some analysis on a periodic basis.
- 3 --
Other Activities
Several activities are already underway that should facilitate the
improvement of the fertilizer information system. First, the various
interagency participants are aware of the need to upgrade the present
system and some steps are underway to improve the quality of the data
and analyses. Some specific examples include the 1977 Annual Economic
Survey to be conducted by the Economic Research Service (ERS). This
survey will be devoted partly to obtaining fertilizer use by type of
crop, storage of material on farms, and fertilizer expendtiures by class
of farms. In addition, ERS has underway a detailed study of the anhydrous
ammonia industry which should support a better understanding of the
complexities of the industry as well as provide certain much needed bench-
marks for analytical purposes.
Work Plan
The subcommittee plans to complete its review and to propose a set of
specific recommendations for consideration by the end of March 1976.
4
SIMPLIFIED FLOW OF U.S. FERTILIZER PRODUCTION AND DISTRIBUTION
MFG. OF
MFG. OF
MIXED FERT.
RAW
INTERMEDIATE
FINISHED
& WHOLESALE
RETAIL
MATERIALS
MATERIALS
FERTILIZERS
LEVEL
LEVEL
CONSUMER
PHOSPHATE
ROCK
A
OTHER
TSP
PHOS.
DP &
INDUSTRY
ACID
OTHER
USES
AP
A
OTHER
RETAIL
OTHER
MIXER
BLENDER
SULFUR
INDUSTRY
INDUSTRY
&
FARMER
MIXER
USES
USES
INVENTORY
ETC.
AN,AS
UREA
NH3
UAN SOLS.
OTHER
NATURAL
GAS
A
OTHER
INDUSTRY
USES
KCL
MINES
- 5 -
Table 1. Fertilizer Summary, United States
1971-72 1972-73 1973-74 1974-75
Nitrogen
Domestic Supply 2/
8,971
9,447
10,252
10,033
Imports
843
882
1,068
1,198
Exports
1,032
1,508
1,270
1,119
Net Supply
8,782
8,821
10,050
10,112
Consumption
8,022
8,295
9,157
8,593
Unexplained Disappearance 3/
760
526
893
1,519
Phosphate (P₂O₅)
Domestic Supply 2/
6,150
6,387
6,786
6,940
Imports
326
312
314
275
Exports
1,102
1,424
1,582
1,888
Net Supply
5,374
5,275
5,518
5,327
Consumption
4,684
5,085
5,099
4,494
Unexplained Disappearance 3/
510
190
419
833
Potash
Domestic Supply 2/
2,432
2,680
2,605
2,304
Imports
3,088
3,117
4,212
3,944
Exports
657
922
947
848
Net Supply
4,863
4,875
5,870
5,400
Consumption
4,327
4,649
5,083
4,415
Unexplained Disappearance 3/
536
226
787
985
1/ Preliminary. 2/ Adjusted for Producer Inventory Change. 3/ Material
produced that is not accounted for in manufactured inventories or recorded
as consumption.
TAB B
- 6 -
TAB B
Saskatchewan Potash Problem
Allan Blakeney, Premier of the Saskatchewan provincial legislature,
claims that the provincial government will buy 51 percent interest in the
Saskatchewan potash industry. If the owners refuse to sell, the
Saskatchewan government will resort to expropriation "at fair market
value" with compensation in refined potash or in a combination of cash
(at least 30 percent) and negotiable bonds.
The 14 firms involved have a rated annual production capacity of 8.3 million
tons of K₂⁰ and last year produced 6.2 million tons, about 1/3 of the world
production.
Canadian potash deposits are estimated at 20 billion tons of K₂O equivalent.
At present production rates the deposits could last 2,000 years.
The U.S. depends on the Saskatchewan industry for roughly 60 percent
(2.6 million tons in 1974-75) of our domestic use of 4.5 - 5.0 million
tons per year.
Producers estimate that the replacement value of the assets is $2.5 billion.
"Fair market value" would likely be somewhat lower.
While the impact of a government takeover would be substantial on the 14
firms involved, there would be probably little or no impact on the U.S.'s
ability to secure potash. The government is planning to continue operation
of the mines and plants and it would expand production beyond the present
level. However, the question remains as to what would happen to prices.
The major point of contention between the firms and the Saskatchewan
government is over the present tax structure and the refusal of the firms
to expand their operations under this structure. They content that the
present system lowers returns to the point where expansion is unprofitable.
The U.S. Embassy in Ottawa has discussed this problem at a high level within
the Canadian government. Among other questions, we have asked what actions
the Federal government of Canada plans to take regarding Saskatchewan's
proposed actions. The Canadian government has not yet replied to the
questions.