Charlie Neibergall/AP Photo
Blake Beckett of Heartland Coop sprays a soybean field, July 11, 2013, in Granger, Iowa.
It’s been a relatively quiet past few years, all things considered, for Koch Industries, almost too quiet for comfort. But of course, that’s how Charles and David Koch (David died in 2019), co-owners of the second-largest private company in the U.S., always preferred to conduct business.
At the end of 2023, the fossil fuel and agrochemical giant re-emerged from its recent lull in activity and made a splash in the business press. The company announced its $3.6 billion purchase of OCI Global’s Iowa Fertilizer, among the largest chemical production sites in the state for nitrogen-based fertilizers.
Along with seeds, fertilizers are the top inputs in modern agriculture that farmers rely on, which has made the ongoing consolidation of fertilizer production a critical threat. Just four companies, the Kochs among them, have acquired vast market share and now together control 75 percent of all nitrogen fertilizer production. At the global level, a cartel of agrochemical firms owns most of the production of the other chemical inputs for fertilizer such as potash. As a consequence of this market power, the prices farmers have to pay for fertilizers have shot up and are often bundled together by the agriculture giants with other required farming products at an even higher markup.
Among the reduced field of fertilizer players, Iowa Fertilizer has been one of the few remaining direct competitors to the Kochs’ agrochemical operations, especially within the state of Iowa, where the Kochs have been expanding their operations.
In addition to the acceleration of concentration, what makes this purchase stand out in particular is that taxpayers are footing the bill. The nitrogen enrichment facility that the Kochs are buying was financed by $550 million in state, local, and even federal tax subsidies brokered by former Republican Gov. Terry Branstad and his current Republican successor, Kim Reynolds, over the past decade. What’s even more outlandish is that the justification for these lavish tax abatement packages was precisely to bolster competition against agrochemical giants like Koch Industries, with the goal of bringing down costs for farmers. Because no strings were attached to the tax breaks, however, state taxpayers could actually end up funding a new round of consolidation rather than competition, not to mention a huge payout for OCI Global.
However, the Koch acquisition may not be completely finalized yet. Last week, 18 agricultural reform and antitrust groups sent a letter to the Department of Justice and the Federal Trade Commission calling for regulators to block the deal using their merger review authority.
“Should the acquisition be allowed to proceed, taxpayers will have effectively subsidized the expansion of Koch’s control over a critical and heavily concentrated sector of our agricultural economy,” the letter reads.
THE DEAL MARKS THE RETURN OF THE KOCH BROTHERS into national headlines after a prolonged period of relative reclusiveness. For most of the company’s history, secrecy is how the Kochs chose to run the company.
The family-run corporation, which deals in the energy, chemical, and agriculture industries, resisted going public in order to maintain the highest degree of privacy around its business dealings. By the early 2000s, the company quietly ascended to become the second-largest private company in the country, next to Cargill. Its growth went nearly unnoticed by the broader public even as its oil refineries and agrochemical plants rapidly spread across the country.
What really put the Koch brothers under the public spotlight were the investigations that started coming out about their shadow network of right-wing political organizations that had taken hold of the Republican Party. Through a number of think tanks and dark-money groups, the Kochs used their vast fortunes to imprint a radical free-market ideology onto Washington and statehouses, always on the side of strangling government, lowering taxes, and slashing regulations.
During the presidential term of Donald Trump, whose candidacy the brothers opposed, however, the uproar over the Kochs dimmed somewhat as the clamor of the Trump presidency and its own threat to democracy eclipsed it. (The Koch-funded right-wing infrastructure, however, did help staff the Trump administration.)
While the brothers’ status as GOP kingmakers took a hit, Koch Industries hummed along profitable as ever and continued expanding their reach. The Iowa Fertilizer deal is one of the largest recent acquisitions the company has made and continues its signature pattern of growth through mergers and acquisitions. In 2022, Koch Industries also took a 50 percent stake in Jorf Fertilizers Company, a large phosphate mining company and global fertilizer supplier. The year before that, the Kochs acquired Compass Minerals, which does mining for agrochemicals ingredients.
The Kochs’ longest-standing business has been in the fossil fuel industry, where they built up refineries across the country. The Kochs then used the profits to move into other lines of business that entailed similar forms of refining and chemical processing. In the 1990s, they decided to establish a position as a major agriculture player. In investigative journalist Christopher Leonard’s Kochland: The Secret History of Koch Industries and Corporate Power in America, he explains that one of the Kochs’ key insights at the time was that the industrialization of agriculture “had slowly and quietly turned [the industry] into a fossil fuel business.” As the Kochs were well aware, agriculture was also a sector heavily subsidized by the federal government, providing a backstop to the cycles of periodic booms and busts that have defined farming.
“Fertilizer is a profoundly uncompetitive sector and it’s also a deeply subsidized sector. This is a typical Koch business, in spite of their libertarian rhetoric,” Leonard told the Prospect over email.
Bo Rader/The Wichita Eagle via AP
Charles Koch speaks in his office at Koch Industries in Wichita, Kansas, May 22, 2012.
In the second half of the 20th century, the entire American farming model moved to the monocrop mega-farms mainly for corn and soybeans. This shift was incentivized by changes in farm bill subsidies and meant that farmers required vast amounts of fertilizers to maintain crop yields on eroding soils that were deteriorating because of monoculture. The key input for producing nitrogen fertilizer is natural gas, which meant the Kochs could easily leverage their core oil and gas business to dominate fertilizers, among other lines of supply for agricultural production.
In their pivot to agriculture, the Kochs also kept running the same business playbook that had brought them success for oil refineries: They bought up distressed processing plants for cheap, reworked them, and then scaled up once they became successful mainly by buying out competitors. Within several years, the Kochs became one of the largest middlemen in the entire agricultural sector.
The company’s growth also came on the back of state and local tax subsidies, like the ones OCI Global had received in Iowa. At one of its largest fertilizer plants in Enid, Oklahoma, for example, the Kochs received around $29 million in tax rebates and incentives to build and then expand the site.
As with fossil fuels, the Kochs’ benefiting from both federal and state government largesse in agriculture has stood in sharp contrast to their political crusade against big government. In their ideological salvos, the Kochs have chastised business leaders for accepting subsidies and tax breaks, terming such conduct “suicide.” But if regulators okay the purchase of Iowa Fertilizer, Koch Industries would once again find itself the beneficiary of the state subsidies.
In 2012, Iowa first wooed OCI Global’s plant to the state over Illinois by striking one of the largest tax abatement deals in state history, covering a substantial portion of the plant’s construction costs. By the time the plant came online in 2017, OCI Global (previously known as Orascom) had taken in $550 million in tax breaks. That included over $200 million in combined local property tax abatements and state loans, along with $300 million in federal subsidies that came from a disaster relief program appropriated by Congress in 2008 after devastating floods hit the state.
Several state lawmakers at the time warned that the massive tax deal was too risky and riddled with loopholes.
“This is the worst economic development deal in state history,” said former state Sen. Joe Bolkcom when the package was approved in 2012.
The only real obligations that OCI Global had to meet were its investment of $3 billion and the creation of at least 265 jobs. Those jobs weren’t the main impetus for the tax deal, though. The real motivation was to bring another competitor to the state with the hopes of reducing costs for Iowa farmers. Nothing in the deal precluded the company from taking taxpayer dollars and then selling off the plant to the Kochs at a higher price than it had invested into the plant in the first place—even though the sale portends higher costs for the farmers whose tax dollars subsidized the plant.
The DOJ and FTC could still step in to block the deal. Concentration among agriculture middlemen squeezes farmers on costs for fertilizers and seeds, while also raising prices for consumers. It’s no surprise that food prices, still hit by inflation, are listed in recent polling as the top economic concern for voters going into the 2024 election, where it could become a decisive issue.
