N.C. farmers pinched by shortage of natural gas High prices send costs of fertilizer up

By BOB WILLIAMS, Staff Writer

Farmers say soaring fertilizer prices have scrambled their plans for the coming season for most crops, including wheat, corn, cotton, tobacco and sweet potatoes.

The cost of nitrogen fertilizers has nearly doubled in tandem with spiraling natural gas prices in recent weeks. The major cost component in making nitrogen fertilizer products is natural gas.

Nitrogen fertilizers are needed to fortify soil to produce nearly every major field crop grown in North Carolina. The state's only primary crops that don't usually need such fertilizers are soybeans and peanuts.

Tar Heel farmers use more than 300,000 tons of nitrogen fertilizer on average each year, according to the N.C. Department of Agriculture.

"It's a pretty tough situation for farmers right now," said Robert Mikkelsen, a professor of soil science at N.C. State University. "It's not like everyone can just plant soybeans."

Consumers are not expected to feel much impact from the higher fertilizer costs, experts say. That is because most farm products are also produced in other countries where natural gas prices and fertilizer costs have remained relatively low.

Locally, nitrogen fertilizer is already twice as expensive as it was last January, said Henry Shearin, manager of Southern States Cooperative in Louisburg. He predicts prices will keep rising as more natural gas is diverted from fertilizer production to heat homes and businesses.

"There is really nothing that can be done in the short term," Shearin said. "We bought in bulk as much as we could, but nobody saw this whole situation coming together like it has."

North Carolina farmers produced nearly 28 million bushels of wheat and more than 75 million bushels of corn last year. The Tar Heel state ranks 18th nationally in wheat production and 19th in corn.

With the price of wheat at or near historic lows, the best option for some farmers might be abandoning crops planted last fall for harvest this spring, said Johnny Barnes of Spring Hope, who farms several thousand acres in Wilson, Nash and Edgecombe counties.

Agriculture experts predict farmers will face similar decisions with corn, cotton, sweet potatoes and other crops this spring unless fertilizer prices fall dramatically.

"Fertilizer is, by far, your biggest cost when it comes to growing wheat," Barnes said. "With wheat, a lot of farmers are at the point where they are better off just parking their tractors until the price of fertilizer gets back down to a reasonable level."

That could be quite some time, experts in the fertilizer industry say.

More than half of the country's fertilizer production capacity has been shut down in the past few months as the price of natural gas has tripled or quadrupled in some areas. Natural gas traditionally accounts for 72 percent of the cost of producing nitrogen-based fertilizer.

Ammonia cost soars, too

Last January, it cost about $100 to produce a ton of ammonia, the basic building block of most nitrogen fertilizers. Now the cost approaches $400 a ton, according to The Fertilizer Institute, an industry group.

"With the supply situation the way it is, the fertilizer manufacturers can make a lot more money selling their natural gas on the spot market than they can using it to make fertilizer," said Randy Weisz, a grain specialist with the N.C. Cooperative Extension Service. "I'm not sure anyone really knows how long it will be before that starts to turn around."

The spike in fertilizer prices is enough to erase any profit a farmer might expect to make on commodity crops such as wheat and corn, Weisz said. To grow wheat, for example, the average North Carolina farmer had to spend about $18 an acre for nitrogen fertilizer last spring. This year that amount of fertilizer probably will cost farmers at least $40 or more -- if they can find it.

Even the best farmers probably are making only $20 or so an acre on their wheat, Weisz estimates -- and that is in a good year.

Wheat farmers worry

Wheat farmers will begin to feel the pinch from higher fertilizer costs within a few weeks. Wheat in North Carolina is planted in the fall and slowly germinates over the winter. Nitrogen fertilizer is typically applied in late winter or very early spring to jolt the slumbering seeds to life.

Weisz said he has been getting more and more calls from nervous farmers.

"They're trying to plan for the upcoming season, and they are pretty worried," Weisz said. "They can't just raise their prices to cover their higher costs, like a lot of businesses can. American farmers here have to compete directly with farmers overseas in places where natural gas prices have not gone up."

Making matters worse, many North Carolina farmers are also being hammered by skyrocketing prices for propane, a fuel used for everything from heating rural homes to curing tobacco. Its wholesale price shot up 48 percent last month, according to the U.S. Department of Energy.

"You can put off buying fertilizer for a little while, but you can't put off heating your house," said Barnes, the Spring Hope farmer. "You don't have any options."

Substitute fertilizers

If there's one advantage to the nationwide shortage of natural gas, it's that it appears to have boosted demand for a product North Carolina has in abundance -- poultry waste.

Mikkelsen, the soil professor, says the short supply and high cost of commercial fertilizers has made poultry waste a more viable alternative.

"Poultry litter has always been a lot cheaper than commercial fertilizer, but you have to use a lot more of it to get the same level of nitrogen," Mikkelsen said. "Most farmers used the commercial fertilizer because it was easier and more reliable, but the recent runup in fertilizer prices has changed all those economics."

He said it takes about 15 truckloads of poultry waste litter to achieve the nitrogen level of one truckload of commercial fertilizer.

Hog waste is another cheap source of nitrogen fertilizer, he said, but it has significant disadvantages.

"The hog waste is wet and really hard to handle," Mikkelsen said. "It's really only practical to use it on farms where it can be piped in."

Staff writer Bob Williams can be reached at 829-4656 or at bobw@nando.com

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