In a newly released white paper, the National Corn Growers Association (NCGA) takes a deeper look at one of the contributors to high costs corn growers face when making planting decisions — 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. One of the chief issues affecting both price and demand is the increased globalization of the market, as well as higher energy costs, especially for natural gas.
The report notes that natural gas, which supplies hydrogen for the production of ammonia and has historically accounted for 70 percent of the cost of ammonia production, has seen its price quadruple since 1999 — from $2 to $8 per million BTUs. This balloons its share of the total ammonia production cost to 85 to 90 percent. Since then, 26 ammonia plants have closed and U.S. production capacity has decreased by 40 percent.
When it comes to globalization, the United States has seen an increase in the import of nutrients such as nitrogen, and the cost of energy impacts this as well. The report accounts how transportation and distribution costs have jumped, driving up the price of nitrogen since the U.S. 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 of 2005.
To read the entire report, go to: http://www.ncga.com/news/notd/pdfs/041408_NCGA%20Fertilizer%20Outlook%202008.pdf
National Corn Growers Association