Soaring natural gas prices are taking their toll on an essential element of agronomic production: nitrogen.

An unprecedented jump in nitrogen costs, when crop nutrients are generally at a yearly low, is causing multiple industry challenges.

"We have seen nitrogen prices jump 25% since late May," said Jim Witthaus, vice president of crop nutrients, Agriliance. "With 85% of the cash cost of producing ammonia coming from natural gas, crop nutrient costs now are reflecting the natural gas price surge in North America."

The long-term status of nitrogen prices is difficult to predict, due to volatile natural gas pricing, Witthaus said. However, Agriliance officials see higher nitrogen prices holding at least through the first half of 2001. Adding insult to injury, nitrogen supplies have begun to tighten, due to the shrinking production levels of U.S. nitrogen manufacturers.

"Some U.S. crop nutrient producers have shut down production, rather than endure financial losses as a result of the high natural gas prices," Witthaus noted. "We have seen a more than 20% reduction of industry production rates. Add to that a national infrastructure unprepared to import large amounts of anhydrous ammonia and the stage is set for tight supplies and continuing strong prices. "While high nitrogen costs and low commodity prices might tempt some producers to reduce nitrogen applications, Dr. Gary Colliver, vice president of agronomy technical services, Agriliance, reminds producers that even at extreme prices nitrogen remains a wise investment.

"Nitrogen is essential for achieving optimum yields," said Colliver. "University research has shown that even in years with high nitrogen costs and low corn prices, return on investment from nitrogen application still reaches well above the 100% level.

"The best advice for producers is to determine their optimum nitrogen rate based on five- to 10-year averages and stick to those rates. They will find that nitrogen always will provide significant value," he said.

Agriliance is an agronomy marketing joint venture formed by Farmland Industries, Cenex Harvest States Cooperatives and Land O'Lakes, Inc. Agriliance serves the cooperative system and independent retail dealers in all 50 states, Canada and Mexico.

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