In a new white paper, the National Corn Growers Association looks at one of the contributors to rising crop production costs-- fertilizer.
The NCGA paper is based on an Internet-based seminar that featured presentations by Harry Vroomen, vice president of economic services for The Fertilizer Institute, and Ken Nyiri, principle consultant for British Sulphur Consultants. A significant issue affecting both price and demand is increased market globalization, as well as higher energy costs, especially for natural gas.
For example, the report notes that natural gas, which supplies hydrogen to produce ammonia and typically accounts for 70 percent of the production cost, has seen prices quadruple since 1999. It has gone from $2 per million BTUs to $8 per million BTUs, thereby ballooning its share of the total ammonia production cost to 85 percent or more. Since then, 26 ammonia plants have closed and U.S. production capacity has dropped by 40 percent.
In terms of globalization, the United States has seen an increase in the import of nutrients such as nitrogen, and energy costs of impacted this as well. The report illustrates how transportation and distribution costs have jumped, driving nitrogen prices higher since the United States. has turned to global sources. Ocean freight fees rose from 300 percent to 400 percent from January 2003 to 2008, and shipping anhydrous ammonia by rail has almost doubled since January 2005.
For a copy of the summary white paper, go to http://ncga.com/news/notd/pdfs/041408_NCGA%20Fertilizer%20Outlook%202008.pdf