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Natural Gas Prices Fuel Worries on the Farm
By Jeff Horwich
January 24, 2001
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Heating bills are not the only place Minnesotans will feel this winter's soaring natural gas prices. Expensive natural gas means expensive fertilizer and an uncertain spring for the region's farmers.

Corn and kidney bean crops are hungry for anhydrous ammonia and urea - two popular fertilizers made by mixing raw nitrogen with natural gas. Soaring natural gas prices have pushed fertilizer prices to double what they were a year ago.

((Photo Courtesy of University of Nebraska - Lincoln)
 
THERE'S NOT MUCH FARMING TO BE DONE IN JANUARY, so John Wojtanowicz brings his mammoth potato picker in for a tune-up. Before the picker sees any action this spring, his 1,200 acres of potatoes will need hundreds of pounds of nitrogen. The same goes for his 2,000 acres of corn and kidney beans, hungry for anhydrous ammonia and urea - two popular fertilizers made by mixing raw nitrogen with natural gas.

Soaring natural gas prices have pushed fertilizer prices to double what they were a year ago. Wojtanowicz guesses his cost per acre of potatoes will go up $35. But that's a rough guess in a wild market like this one and, like many farmers, he's bought less than half of the fertilizer he'll need this spring.

A little more manure from a neighbor, and some creative crop rotation might help cut down on fertilizer need, but like many cash crop farmers, Wojtanowicz admits he's dependent on fertilizer.

"We only use what is the optimum amount anyway, and decreasing our usage of nitrogen would just get us lesser crop, and so we wouldn't do that," Wojtanowicz says. "Any farmer that is reasonably successful is already being as efficient as he can and the only thing we can do is try to be more efficient to make up for this. But there is not much wiggle room."

Farmers are used to laughing off tough situations. But nationwide, nitrogen fertilizer plants are producing at only half their full capacity. Last year's hot summer and a shortage of new gas wells have made farmers just one of many groups clamoring for limited supplies.

"Some of the smaller farmers that haven't locked in their prices are going to probably be hit the hardest."

- Paul Evans
Stearns County fertilizer dealer
Price agreements made months ago between farmers and dealers, dealers and distributors, distributors and factories make fertilizer a less-attractive option for those holding the gas. That includes fertilizer factories, says Paul Evans, a fertilizer dealer in Stearns County.

"What we've seen is a lot of plants that have closed down in the U.S. because they couldn't afford the natural gas, or the natural gas they had contracted has been sold on the open market, and facilities have been able to double their money without making the product," says Evans.

At least one large supplier to Minnesota farmers, CF Industries, guaranteed recently that it would meet all of its orders for the spring. Natural gas-based fertilizers are essential to the state's yearly harvest; Minnesota's 7 million acres of corn - the state's top crop - are especially dependent on nitrogen. Thanks also in part to sandy soil, Minnesota farmers use 800,000 tons of ammonia and urea a year. Hog and dairy farmers depend on the fertilizer for a good crop to feed their herds.

Farmers like Wojtanowicz - with 3,000 acres - might still be able to play hardball with their suppliers, get the nitrogen they need, and ride out the tough season. Size, says Evans, is power.

"Some of the smaller farmers that haven't locked in their prices are going to probably be hit the hardest. They don't have the influential power to be able to negotiate high dollar deals, so they're kind of at the mercy of the market at right now, and that's extremely expensive.

FOR MORE INFORMATION
Learn more about the reasons for higher energy prices and the prospect for Minnesota's energy future in MPR's online project, This Cold House.
 
The demand for natural gas for heating will slacken later this spring, and Wojtanowicz would like to put off buying fertilizer until June if he can. But he doubts the fertilizer market will change quickly enough when that happens, and he'll be looking to consumers to make his season worthwhile.

"That'll be our strategy, We'll try to pass that cost on. We'll try to see if we can get higher prices for our potatoes and our seed and our regular corn and our beans. But that's not any kind of a sure thing," he says.

The only sure thing right now is that the potato picker will be polished this spring, and ready to go.

Jeff Horwich covers central Minnesota for Minnesota Public Radio's Mainstreet unit. Reach him via e-mail at jhorwich@mpr.org.