COOPERATIVE EXTENSION
Colorado State University

February/March 2001
Volume 21
Issue 2

Nitrogen Fertilizer

Strategies For Stretching Nitrogen Fertilizer Dollars

New Higher N prices are linked to natural gas prices, and will make farmers take a second look at management practices.

Why are nitrogen (N) prices so high this spring? The N fertilizer prices have more than doubled since last year. This is mainly because of large increases in natural gas prices. What do natural gas prices have to do with N fertilizers? Nitrogen products are manufactured from ammonia synthesized from natural gas, steam and air. Ammonia is the most concentrated N fertilizer, and is upgraded to produce other N products. Nitrogen production costs are affected the most by natural gas prices. The natural gas component of N production costs is roughly 70 - 90% of the total cost.. With the price of natural gas at an all time high, as many as 30% of the nation’s ammonia plants may halt production completely. The inflated production costs, as well as the decreased supply of ammonia are resulting in a sharp rise in N fertilizer prices this year. Figure 1 and Table 1 show the increase in prices of various N fertilizers as compared to last year. The situation may become even worse as current market prices are well below production costs. This, in turn, is forcing N production plants to scale back or shut down. Tighter supplies, along with no signs of a warming trend this winter, will continue to keep natural gas prices high which will keep the price of N fertilizer high.

Figure 1. Nitrogen prices comparison 2000 vs. 2001.

Why don’t we import ammonia, the main source of N fertilizers from other countries to meet our deficit? Although more than 75 countries around the world produce ammonia, the cross-border trade is very limited, averaging only about 11 % annually. According to The Fertilizer Institute (TFI), nitrogen imports were up more than 27% from the year before, between July and November of last year. However, this increase is still insufficient to meet our current needs. Further increase in nitrogen imports doesn’t seem likely, because most countries use their production internally, and demand for ammonia is high there as well.

The big question is how do we deal with the current situation? Well, there are various N management options available for producers. Cutting back a few pounds from conventional application rates is unlikely to reduce yields. Also, paying adequate attention to N credits, where available, can make a significant difference. There may be potential to maintain yields with reduced levels of N application, while maintaining reasonable profit margins.

As the weather warms up and natural gas prices start to come down we may start seeing changes in N production. In fact, some of the plants are coming back in operation already, although not to their full capacity. However, how long it will take before that is reflected in the N fertilizer prices this year is a good question.

The following articles will share and illustrate various nitrogen management techniques of using N fertilizer sensibly without compromising grain yield and farm profitability.

by Raj Khosla
Extension Specialist
Precision Agriculture

Table 1. Nitrogen fertilizer, fertilizer grade, and price (US$) in 2000 and 2001.

FROM THE GROUND UP agronomy news is a monthly publication of Cooperative Extension, Department of Soil & Crop Sciences, Colorado State University, Fort Collins, Colorado.

Web Site: http://www.colostate.edu/Depts/SoilCrop/extension/Newsletters/news.html

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