Re: Storm Coming III

Fertilizer prices sky high!
By Glen Jones
Director
Research, Education & Policy Development

The U.S. is the world's second largest nitrogen producer after China. Currently, the U.S. has capacity to produce slightly more than 20 million metric tons of ammonia, which is used as a fertilizer and as a building block for other nitrogen products.

During the past year, fertilizer prices have risen dramatically. Prices have increased due to increased energy costs for production (especially natural gas), increased transportation costs, and increased demand. As natural gas prices have risen in the U.S., the cost of producing anhydrous ammonia has increased to the point that much of the U.S. production capacity has been closed. This is because the value of natural gas is greater for other uses...i.e. home heating and electrical power generation, than for nitrogen fertilizer production.

Natural gas is the fundamental ingredient, for which there is no practical substitute, and the major cost component of making all basic nitrogen fertilizer products. The cost of natural gas represents 70 to 90 percent of the production cost of one ton of anhydrous ammonia nitrogen fertilizer.

The United States needs significantly greater supplies of natural gas for nitrogen fertilizer production to meet critical agriculture and food production needs. According to the USDA Economic Research Service, fertilizer costs are up 30.8 percent in 2005 from 2003. In Central Texas, farmers paid $290-$300 per ton for anhydrous ammonia in 2004, $390-$415 per ton in 2005 before the hurricanes, and it got as high as $480 per ton after the hurricanes. Prices have decreased some in November to around $460 per ton
http://www.txfb.org/TexasAgriculture/2005/120205/120205energy.htm