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UPDATED FERTILIZER REVIEW: Fertilizer Prices Collapse To Multi-Year Lows

It's hard to be shocked by anything that happens in the markets these days, but the fertilizer industry was set back on its heels this week by news of a severe drop in ammonia prices. A major player in the international trade reportedly sold anhydrous for just $113 a ton in Tampa, with prices even lower out of the Black Sea. That represents a drop of more than $200 a ton in just one week, as the global financial crisis continues to limit trade.

The latest deal would translate into a farm-gate price of around $300 a ton, according to historical trends, and farmers report some dealers offering that price or even a little better this week.

But whether most farmers will be able to get access to the product remains highly uncertain, because suppliers around the Midwest are still stuck with inventory bought at record prices this fall. As late as last week dealers were still quoting ammonia above $1100 a ton in Illinois, according to USDA.

It's unclear how long the latest break will last, however. Ammonia is bid around $155 and offered at $180 for January and February delivery out of Tampa. Those prices would still be huge bargains, some 80% lower than the record prices seen in September. And at current natural gas prices, the cost of producing ammonia in the U.S. is higher still. That has convinced Terra Industries to idle its Donaldson, LA, plant for repairs.

"Terra management has determined that this is an opportune time to make the repairs, since the current nitrogen market environment allows the company to economically import ammonia from Trinidad to fulfill ongoing sales commitments that would normally be met with Donaldsonville output," the company said in a press release on Friday.

Prices for other nitrogen fertilizers also dropped, though not as much. Urea, which was the first to break, fell $30 at the Gulf to $221 a ton. Prices for that product appeared to be stabilizing, at least for now.

While manufacturers relentlessly close plants attempting to bring supply in balance with demand, new product is hitting the market. The trade confirmed reports that China is ready to resume exports, with some deals for DAP reportedly done. DAP dropped as expected earlier to around $400 a ton at the Gulf, where prices are also seen for January and February. Phosphoric acid appears to have broken by up to a third in trade this week.

Prices for U.S. natural gas remain higher than in major producing regions, but continue to fall with the broader energy market. Despite forecasts for much colder than normal temperatures gas futures tumbled below $6 Friday, following release of a bearish inventory report on Thursday. Supplies in storage fell 64 billion cubic feet, less than expected.