Archive for Saturday, February 10, 2001

High gas prices felt in fertilizer market

February 10, 2001


— Plagued by high natural gas prices, the nation's fertilizer plants cut their production in half during December and January, an industry expert says.

With spring planting just weeks away, fears are growing among farmers worried whether they will be able to find enough nitrogen fertilizer to top-dress fields of winter wheat and still have enough available for their spring-planted crops.

But suppliers and other industry sources say there should be enough fertilizer produced by planting time to get the job done albeit at very high prices.

Many fertilizer plants have restarted in the last few weeks, and plants across the nation are now operating at 70 to 75 percent capacity, said Ron Phillips, spokesman for the Fertilizer Institute in Washington, D.C.

"Some people use the term shortages, I think that is best understood," he said. "There may be certain products in certain places that farmers may not be able to get at the particular time they want those are the kinds of disruptions we may see in the spring."

Particularly tight across the nation are supplies of anhydrous ammonia and other liquid-based nitrogen solutions because of the limited infrastructure for quickly transporting those products, Phillips said. Unlike dry bulk fertilizer products that can be moved by trucks and barges, the special tanks required for transportation of these liquid fertilizers are in limited supply.

Natural gas is a major component of fertilizer production. Farmers put anhydrous ammonia directly on the soil as a fertilizer, and it is the basic building block of other nitrogen fertilizers.

"I wouldn't guarantee there is going to be a shortfall," Phillips said. "A lot depends on how quickly the season comes upon us. If we get an early break in weather and all farmers want to get into the field that will give us less time to make up for production that is lost."

Kansas which has fertilizer production facilities in Lawrence and Dodge City as well as nearby access to plants in Oklahoma and Texas is in better shape than states farther away from production facilities, said Steve Morgan, director of the fertilizer division for Bartlett and Co. in Kansas City, Mo.

"It started out being pretty bleak I don't think it is pretty bleak now," Morgan said.

Morgan said demand for fertilizer is also declining as farmers decide to plant less corn this spring as well as put on less of that expensive fertilizer on the crops that they do grow.

"There is enough to do the job," Morgan said.

Farmers will be paying a lot more for fertilizer.

While prices vary across the nation, a product like ammonia which was selling at between $225 to $250 a ton last year now can cost $400 a ton or more, Phillips said.

It will be late May or June before fertilizer prices drop to reflect lower production costs and even then they are not expected to get down to early 2000 price levels, he said.

When Farmland Industries announced its first first-quarter profit in two years last month, it said its fertilizer division had been hard hit by high natural gas prices.

Kansas City-based Farmland is the nation's largest farmer-owned cooperative.

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