Soaring natural gas prices continue to plague North America as the new year begins, causing nitrogen prices to remain high, while supplies tighten.

With 80 to 90% of the cash cost of producing nitrogen hinging on natural gas, the entire fertilizer industry is struggling to deal with the resulting cost-price squeeze.

"This is not a case of price gouging by nitrogen producers," said Al Giese, Agriliance co-president. "Current nitrogen market prices are well below production costs. That has forced many nitrogen producers to scale back on production or shut down plants. Nitrogen producers are struggling to survive."

Some of the nitrogen companies that have scaled back nitrogen production or closed production plants include Mississippi Chemical, Terra Industries, Inc., Agrium, Royster-Clark, Inc., Potash Corp. of Saskatchewan, Koch Nitrogen Corp., Farmland Industries and CF Industries. And, Giese added, the potential for more shutdowns is likely.

Agriliance remains committed to providing local cooperatives with adequate volumes of crop nutrients for the 2001 growing season. However, without a significant warming trend this winter, natural gas prices--and consequently nitrogen prices--are expected to remain high, and adequate nitrogen supplies may become more difficult to obtain.

As producers prepare cropping plans for 2001, Stan Riemann, Agriliance co-president, recommended they work with local agronomists to analyze yield goals, soil tests, cultural practices and each operation's financial situation to determine nitrogen application rates and strategies.

"We understand the pressure higher nitrogen prices add to the economic challenges producers face," Giese said.

"We will regularly update our customers on the status of this situation as we work through this challenging period," Riemann added.

Agriliance is an agronomy marketing joint venture formed by Farmland Industries, Cenex Harvest States Cooperatives and Land O'Lakes, Inc.

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