America’s food system.
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Koch’s fertilizer plant was basically an oil refinery, but instead of transforming crude oil into gasoline, it transformed natural gas into nitrogen-based fertilizer. It might seem odd that crop fertilizers were produced from fossil fuel. The reasons for this were diverse, but they had a lot to do with the industrialization of the American farm.
During the 1990s, American farmers were producing more food than ever. Barn-sized combines and tractors tilled farms that stretched for thousands of acres. This system was entirely dependent on artificial fertilizers, because even the best, deepest topsoil in the Midwest couldn’t support such massive yields of corn and soybeans year after year. To achieve the megaharvests, farmers applied a mixture of three chemicals to supercharge the soil: potassium, phosphorus, and nitrogen.
The first two chemicals are mined from the earth, just like coal. But nitrogen is different: there aren’t large deposits of nitrogen underground. Before World War II, farmers had to plant special legume crops to “fix” nitrogen in the soil through special nodules in their roots. This was time consuming and complicated. But in the early 1940s, a pair of German chemists figured out how to produce nitrogen artificially. They invented something called the Haber-Bosch process, which fixed nitrogen inside a refinery using natural gas as the primary input. This was revolutionary. Nitrogen fertilizer became the lifeblood of modern farming.
Koch’s facility in Louisiana used natural gas to create a nitrogen-rich chemical called anhydrous ammonia. It used the pipelines to ship ammonia north, where farmers applied it to the soil. The fertilizer plant looked very much like an oil refinery; it was a knotted landscape of interweaving pipes and tanks studded with giant cracking towers. And the facility was operated a lot like an oil refinery—Koch Industries was able to apply what it had learned at Pine Bend and Corpus Christi. Dean Watson employed a team of natural gas traders to get him the cheapest possible sources of feedstock, and he used computer models to run the plant at peak efficiency, just as Koch’s refinery managers did.
The fertilizer business itself was a platform for growth. It was a listening post to learn about all the businesses that the fertilizer business touched. Dean Watson “executed violently” against this task. He met the players in the food industry, and he studied the markets for food and crops. Soon enough, he and others started to see how Koch Industries might compete in the food business.
The entire food system appeared to be one immense machine that laundered energy from fossil fuels into food calorie energy that humans could eat. At the beginning of the supply chain was the fossil fuel—gasoline used by tractors and natural gas used to make nitrogen fertilizer. The next link of the chain were farmers raising crops and animals, using the fossil fuels as they went. After that came the food processing industry, like the grain mills and slaughterhouses. Finally, there were the grocery stores and restaurants that distributed the final food products. Koch Industries planned to insert itself into every link of this chain. Charles Koch had made his company the single largest purchaser of American crude oil in the span of a decade. Now his company might be able to do the same thing with food.
Dean Watson was promoted from overseeing Koch’s fertilizer production to overseeing a new division called Koch Agriculture. This division would be the cornerstone of a business plan that was so large in its ambition, so vast in its scope, that nobody outside the company would have believed the plan was real.
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Koch Agriculture first branched out into the beef business, and it did so in a way that gave it control from the ranch to the butcher’s counter.
Koch bought cattle feedlots. Then it developed its own retail brand of beef called Spring Creek Ranch. Dean Watson oversaw a team that worked to develop a system of “identity preservation” that would allow the company to track each cow during its lifespan, allowing it over time to select which cattle had the best-tasting meat. Koch held blind taste tests of the beef it raised. Watson claimed to win nine out of ten times.
Then Koch studied the grain and feed industries that supplied its feedlots. Watson worked with experts to study European farming methods because wheat farmers in Ukraine were far better at raising more grain on each acre of land than American farmers were. The Europeans had less acreage to work with, forcing them to be more