University of Nebraska-Lincoln Extension, Institute of Agriculture and Natural Resources

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October 13, 2006

Comparing world fertilizer prices

Figure 1. NYMEX Natural Gas Futures Close from Sept. 1, 2005 to Sept. 6, 2006. (Source: WTRG Economics; links to larger version)

What a difference a year makes. Last year, hurricane season wreaked havoc on natural gas production and prices spiked to almost $15 per million BTU (MMBTU). Now jump to mid September 2006 when prices fell below $5/MMBTU, largely due to not having any disruptions in the supply and a storage level almost 5% higher than the average of the past five years. That’s like paying $3 per gallon for gas last summer and $1 per gallon now.

A small amount (less than 2%) of all natural gas produced in the United States is used to make nitrogen fertilizers; however, natural gas accounts for 80-90% of the nitrogen production cost. In 1999 the average price of natural gas was near $2/MMBTU, but then it increased and remained near $6/MMBTU until last year. The increased costs last year sent fertilizer nitrogen prices to all-time highs (Figure 1).

World prices for natural gas in the Middle East and Russia, however, are much lower than domestic prices ($2.60 to $4/MMBTU), and fertilizer is truly a world-wide commodity. One of the major production ports for shipping urea and ammonia is Yuzhnyy (Ukraine) on the Black Sea. Spot market prices at international producer origin facilities has urea ranging from $220 to $252 per ton with ammonia ranging from $227 to $293 per ton. An excellent source for world fertilizer information is The Market, published in London, England. (See http://www.fertilizerworks.com/ , then click on the left side under “The Market”.) Remember, these prices are set by manufacturers and do not reflect added costs for transportation, marketing and dealer markup. The price you’re quoted by your local dealer accounts for these added costs.

For information . . . on getting more from your fertilizer dollar, see Fertilizer management strategies for 2007 in this week's CropWatch.

What this means for local farmers is high nitrogen fertilizer prices now (until suppliers can sell higher-priced inventory), but the hope of significantly lower prices next spring from nitrogen products manufactured with cheaper natural gas the past few months. As an example, eastern and central Nebraska prices for fall-applied ammonia are being quoted near $350 per ton ($0.21/lb of nitrogen). Local prices for ammonia across Nebraska this past year varied from $475 per ton to near $550 per ton ($0.34/lb of nitrogen), with urea costing $350-$360 per ton ($0.39/lb of N). Urea and nitrogen solutions now make up the major portion of the nitrogen market due to changing producer preference, safety considerations and application options.

The picture is totally different for diammonium phosphate (DAP or 18-46-0). The United States is the major producer of phosphate products for the world. North Africa is the other major production center. DAP prices have been steadily rising the past few years but appear to be leveling off now. (See the September 14, 2006 “The Market” report for prices from 2001 to now.)

Gary Hergert
Extension Soils Specialist
Panhandle REC

Copyright 2006 by the University of Nebraska Board of Regents. All rights reserved.

Published by University of Nebraska-Lincoln Extension in the Institute of Agriculture and Natural Resources Cooperating with the counties and the U.S. Department of Agriculture.

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