Soaring gas prices may limit spring fertilizer supplies

MAPLETON - The soaring price of natural gas could keep farmers from making solid plans for the upcoming planting season. Natural gas is the main ingredient used in the production of anhydrous ammonia gas, liquid nitrogen and urea - fertilizer products farmers use to prepare their fields for growing corn. The cost of natural gas this winter has made it more cost effective for fertilizer producers to sell the natural gas they own rather than use it to produce nitrogen for their products.

Duncan McGregor, manager for the Watonwan Farm Service fertilizer plant in Mapleton, said the prices of anhydrous ammonia and some forms of liquid nitrogen have increased by about 30 percent since fall.

The price for anhydrous ammonia was increased from $350 to $370 per ton Monday night, he said. Farmers could buy anhydrous ammonia for about $285 this fall.

"We're looking at probably seeing higher prices by spring and possibly some shortages," McGregor said. "I wouldn't doubt it's going to cause some farmers to plant soybeans just to save money [on fertilizer] - because they may not be able to get it even if they want it."

Watonwan Farm Service has stopped selling urea - the solid form of manufactured nitrogen used by corn growers. The dealer has been buying fertilizers at set prices for later delivery, then letting customers lock in at current prices, too. But dealers want to make sure they will be able to get the products they have already sold to their customers.

"It's gotten to the point where we can't buy urea because the manufacturers have cut production," McGregor said. "We want to make sure we don't get oversold, so we've stopped sales."

Terra Industries Inc. and Terra Nitrogen Co. have been suspending production of their fertilizer products and selling off their natural gas supplies sporadically since early December. Production of nitrogen fertilizers and methanol were stopped completely at most of their North American plants in January because the two companies had not committed to buying natural gas for the month.

The plants that were shut down produce 66 percent of the anhydrous ammonia and 76 percent of the urea sold by the businesses.

"While nitrogen fertilizer and methanol prices have increased significantly, we cannot generate positive cash flow from most of our North American plants at current natural gas prices," Michael Bennett, Terra Industries executive vice president and chief operating officer, said earlier this month. "We are keeping all of our facilities staffed so that we can resume production quickly" if warmer weather causes a decrease in natural gas prices.

On Monday, Terra Industries announced it was starting fertilizer production at the Port Neal, Iowa, plant. That plant produces 12 percent of the anhydrous ammonia and 5 percent of the urea for Terra Industries.

Minnesota is the fourth-largest corn producer, growing $1.3 billion worth of corn in 1998. The state's farmers used more than 600,000 tons of manufactured nitrogen fertilizer last year, which means price increases this year could translate into additional costs of $100 million.

Loren Tusa, Minnesota Corn Growers Association president who farms 900 acres near Jackson, said most corn farmers are holding off on early fertilizer purchases and don't necessarily believe reports of a potential shortage.

"As farmers, you're always skeptical, because this is the time of year someone is yelling about a shortage in seed corn or chemicals or fertilizer, and every year, when it comes down to it, it's available," he said. "It's just setting somebody up for a price hike."

But McGregor said many of his customers have already bought their fertilizer or are buying it now.

"They're concerned," he said. "That's why they're in here buying as much as they can - we don't have a lot of other crops to go to besides soybeans.

"Farmers today cover themselves - they're not waiting until spring, they're trying to get covered ahead of time. We would advise farmers to get anything ordered that they're going to need."

This article contains information from The Associated Press.

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-- Martin Thompson (mthom1927@aol.com), January 11, 2001