Monday, January 15, 2001

Land Lines Fertilizer prices heading up

By Scott Waltman American News Writer For farmers, the soaring price of natural gas won't just mean higher heating bills. It'll also mean an increase in the cost of growing crops. For farmers, the soaring price of natural gas won't just mean higher heating bills. It'll also mean an increase in the cost of growing crops.

That's because many producers use nitrogen-based fertilizers.

Eighty-five percent of the cost of converting nitrogen into ammonia reflects the price of natural gas, said Jim Gerwing, an Extension soil specialist at South Dakota State University in Brookings. That conversion is necessary to make nitrogen-based fertilizers. As a result, fertilizer prices have skyrocketed in the past few months. He said a year ago, it cost $100 to convert a ton of nitrogen into ammonia. Today, it's $180.

Gerwing spent most of last week traveling through eastern South Dakota trying to answer farmers' and ranchers' questions about high prices. His tour included a stop in Aberdeen.

Many American manufacturers of nitrogen have stopped producing it so they can sell natural gas, Gerwing said.

"They're making more money selling their natural gas off to heating companies than they can by using it to make fertilizer," added Dick Siefkes, manager of the South Dakota Wheat Growers fertilizer distribution center in Bath.

"In theory, they almost have to do that because it'd cost them so much to make ammonia that it could be shipped in (from other countries for less)," Gerwing added.

The cost of natural gas in South American countries and the Caribbean hasn't increased in the past year, Gerwing said. So the cost of conversion is less there. Supplies from those countries could be shipped to the United States. That could be a saving grace for local farmers because there could be a shortage of nitrogen-based fertilizer in the states as the growing season approaches.

"Supply is very low, demand is high," Siefkes added.

Wheat Growers Bath facility has about 5,000 tons of fertilizer on hand. But suppliers are telling Siefkes that in the months to come, his facility will receive between 25 and 35 percent less fertilizer than ordered. "We're just taking care of our customers who return year after year. The other people that call -- it's kind of sad to say that I'm turning them away."

Gerwing said the cost of natural gas has been so low for the past four or five years, that today's higher prices are taking a toll on power companies. They haven't made improvements to their facilities and haven't kept large surpluses in recent years because they weren't making much of a profit on the product. Still, he and Siefkes agree that there may be natural gas price relief once spring arrives.

Actually, Gerwing said it's still too early to tell whether there will be a fertilizer shortage as planting season approaches. But even that possibility is pushing prices higher.

He said farmers could cut back a bit on the amount of fertilizer they use and still get good results. Early applications have a greater effect on yield than do late ones, so limiting late applications is another idea. Farmers could also use non-nitrogen-based fertilizers, although those prices also have gone up in the past year, albeit not as dramatically.

Siefkes said he expects more farmers to plant soybeans this spring. While corn requires fertilizing, beans don't. But, as a result, he said, many high-yielding soybean varieties could be in short supply by spring.

"When we come to March, we'll know a lot more," Gerwing said. "I just don't know if anyone knows how much of the price increase (of fertilizer) is supply problems and how much is pure speculation."

http://web.aberdeennews.com/content/aberdeen/2001/01/15/front/1a2-0115.htm

-- Martin Thompson (mthom1927@aol.com), January 16, 2001