Fertilizer costs won’t drop significantly until natural gas prices fall, according to Steve Biggar of Mosaic Co.
And with lots of uses competing for limited accessible resources of natural gas, its price is likely to stay strong for the foreseeable future.
Natural gas is used to make ammonia that becomes nitrogen fertilizer.
High natural gas prices in North America have decimated the United States nitrogen fertilizer industry, Biggar reported at Crop Production Week in Saskatoon recently.
Natural gas futures peaked in December at more than $15 US per mmBtu (10,000 million British thermal units), driven up by disruptions caused by Hurricane Katrina.
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With a mild winter, prices have dropped to about $9, but that is still double the price of two years ago.
Costly natural gas has put about half of the U.S. ammonia capacity out of production. Canada’s plants have held on, thanks to slightly lower gas prices and newer, more efficient operations.
As American production dropped, offshore imports increased and now fill 60 percent of U.S. fertilizer nitrogen needs.
Production has migrated to places where natural gas producers have a surplus such as the Persian Gulf and Russia, and where the price is about one-tenth the North American level, Biggar said.
The shift from domestic to imported product will rebalance the price levels of nitrogen products, he said.
Because urea is easier to transport than UAN and ammonia, its price will drop relative to the other two and will become the product of choice for retailers.
Biggar expects high natural gas prices will be with us for at least five to seven years. Developments that might reduce North American natural gas prices are a Mackenzie Valley pipeline transporting energy from the far north and plants that gasify coal.
Rising natural gas costs also drive up the cost of the ammonia component of ammonium phosphate products. Phosphate costs are also rising because the source of North American phosphate is declining in quality and it costs more to extract.
Biggar said farmers would react to high fertilizer costs by turning to precision placement technology.
I believe there will also be an increased emphasis on understanding the biology of the soil in the root zone, particularly the relationship between plants, bacteria and other micro-organisms and plant nutrients.
The ability of pulse crops to work symbiotically with bacteria in inoculants to fix nitrogen is already recognized and valued. But there is great potential to prospect for micro-organisms to see which ones can work with other crops and other nutrients. They also have the potential to reduce plant diseases. Scientists call these microscopic organisms plant-growth-promoting rhizobacteria.
Some companies have already introduced PGPR products, such as Philom Bios’ Jump Start phosphate solubilizing inoculant and Brett-Young Seeds’ Bio Boost, which oxidizes sulfur and provides other benefits when used with canola, a high sulfur demand crop.
Some farmers are also studying the biology of their soils and investigating the use and benefits of compost and compost tea.
These are exciting developments in a pioneering field of science that must be pursued to manage fertilizer costs because it appears the cost of chemical fertilizers is unlikely to fall soon.
