Fertilizer prices key on energy prices. With that in mind they should
come down. Lawn fertilizer is basically nitrogen fertilizer.
Manufacturing 1 ton of anhydrous ammonia fertilizer requires 33,500
cubic feet of natural gas. When natural gas prices are $2.50 per
thousand cubic feet, the natural gas used to manufacture 1 ton of
anhydrous ammonia fertilizer costs $83.75. If the price rises to $7.00
per thousand cubic feet of natural gas, the cost of natural gas used in
manufacturing that ton of anhydrous ammonia rises to $234.50, an
increase to the manufacturer of $150.75. Most of the other popular
forms of nitrogen fertilizer are made with anhydrous ammonia. Urea is
formulated by a reaction between anhydrous ammonia and carbon dioxide at
high temperature and pressure. Ammonium nitrate is formulated by
combining anhydrous ammonia and nitric acid in a very corrosive
manufacturing climate. Solution liquid fertilizers (28 to 32 percent
nitrogen) are composed of one-half urea and one-half ammonium nitrate.
It's pretty hard to apply a nitrogen fertilizer formulation that doesn't
have natural gas in its manufacturing process.
Prices for diammonium phosphate (DAP), Phosphate rock, Potassium
chloride, triple superphosphate (TSP), and Urea were 235 percent higher
in the quarter ending June 30,2008, over the prior period a year
earlier. The biggest gainer was Phosphate rock which has risen 514
percent between April-June 2008 and April-June 2007.
Of course the people that bag and distribute the fertilizer leverage
their price on the cost of the basic materials. Fertilizer sales have
slowed dramatically in recent weeks, indicating farmers are either
waiting until the last minute to buy for the coming season or even
forgoing some fertilizers. Fertilizer purchases are running about 60
percent of normal.
The $500- to $700-per-ton acceleration in fertilizer prices during the
last 18 months now pales next to the viciousness of the price collapse
last fall: Between October and November 2008 alone, wholesale prices of
ammonia plunged from $830 per ton to $110 per ton, less than the cost of
North American production, fertilizer manufacturers report.