Nitrogen Prices Trend Up

The recent trend toward high nitrogen (N) prices is here to stay at least for the next two years, says Sebastian Braum, West Coast agronomist with Yara North America.

"Prices will likely go up from what we're seeing this fall," Braum says. "There is a shortness of urea and UAN [urea ammonium nitrate solutions] all around the world. Demand is high, but there is no new capacity coming on line."

Braum cites high natural gas prices as the root cause behind depressed N fertilizer production in the United States. "Domestic fertilizer companies have a hard time making money if the natural gas price in the U.S. is above $4 [per million BTU]," he explains. "Right now, the January market price is above $9 [per million BTU]."

Natural gas is the base input for making nitrogen fertilizer, Braum adds. "Natural gas is at least 80% of the production cost."

Whether farmers plan to apply N in their fields in liquid solution or as anhydrous, "costs have risen and will continue to rise," Braum says.

Alan Miller, a Purdue Extension ag economist, agrees that N prices will continue to go up. "If we look at futures for natural gas, February 2005 is still above $8 per million BTU," he says. "So, anhydrous ammonia is likely to get even more expensive and more problematic in terms of managing production costs."

Miller advises farmers to consider working closely with agronomists to fine-tune their N use during this high-cost time period. "It doesn't help that the supply of urea is tighter than last year," he says. "Indiana producers have been using a lot of liquid N (UAN)."