HOUSTON (AP)--Farmers may soon have to hold their noses when paying for fertilizer--the soaring cost of natural gas is expected to increase fertilizer prices.
It's all quiet on the farm for now--growers don't use much fertilizer this time of year. But they worry about facing higher prices when applying it to fields in a couple months, the Houston Chronicle reported.
Natural gas is used as feedstock for anhydrous ammonia, which is used to make virtually all nitrogen fertilizer in the United States.
The price of gas has nearly doubled from a low of $2.49 in February to a high of $4.68 per thousand cubic feet on June 27, and it was trading this week for about $4.40. Ammonia, priced at New Orleans, has gone from $110 to $190 per ton this year, according to an analyst for Credit Suisse First Boston.
Nitrogen fertilizer prices in the Midwest have risen 25% since late May. That's noteworthy because fertilizer prices usually decline after the end of spring planting season.
On top of that, fertilizer manufacturers have cut back production an average of 20%, according to Jim Witthaus, an executive at Agriliance, a marketing joint venture between Farmland Industries, Cenex Harvest States Cooperatives and Land O'Lakes.
Fertilizer makers are among the first natural gas consumers to cut demand when prices go up, said Charles Sanchez, energy markets manager in Houston for Gelber & Associates.
Farmers who paid around $225 per ton of anhydrous ammonia this spring could end up paying $300 if natural gas prices don't ease, predicted Terry Francl, a staffer at the American Farm Bureau Federation.
Francl said imported fertilizer could ease the price crunch. The Caribbean nation of Trinidad and Tobago is potentially a big supplier, and new production is coming from Venezuela and Argentina.
In fact, the Fertilizer Institute worries that U.S. plants will be at a disadvantage against competition from countries where natural gas prices are below $1 per million British thermal units.
Francl said growers in the Corn Belt like to use ammonia, putting down one-third to one-fourth of the amount needed for the crop into the soil during October and November. It binds to the clay in the soil and stays put until the spring, when the soil temperature reaches 55 degrees, at which point a type of soil bacteria converts it into a nitrate form that plants can use.