Abstract
The volatile and upward trend in U.S. natural gas prices from 2000-05 has led to a 17-percent decline in the Nation’s annual aggregate supply of ammonia. During the period, U.S. ammonia production declined 44 percent, while U.S. ammonia imports increased 115 percent. Also, the share of U.S.-produced ammonia in the U.S. aggregate supply of ammonia dropped from 80 to 55 percent, while the share from imports increased from 15 percent to 42 percent. Meanwhile, ammonia prices paid by farmers increased from $227 per ton in 2000 to $521 per ton in 2005, an increase of 130 percent.
Natural gas is the main input used to produce ammonia. Additional increases in U.S. natural gas prices could lead to a further decline in domestic ammonia production and an even greater rise in ammonia imports.
Introduction
Nitrogen is vital to a plant’s ability to develop proteins and enzymes, which, in turn, help the plant grow to produce food, feed, and fiber for animal and human consumption (Kramer). The importance of nitrogen fertilizers to U.S. agriculture is evidenced by its rising use over time. From 1960 to 2005, annual use of chemical nitrogen fertilizers in U.S. agriculture increased from 2.7 million nutrient tons to 12.3 million nutrient tons (fig. 1). This increase is considered to be one of the main factors behind increased U.S. crop yields and the high quality of U.S. agricultural products (TFI (d); Hallaway).
In 2005, U.S. agriculture used 22.15 million tons of chemical fertilizer nutrients (nitrogen, phosphate, and potash), of which nitrogen accounted for 56 percent. About 42 percent of total nitrogen used during the period was attributed to production of corn (ERS(c)). Among crops, corn accounted for the largest share of nitrogen use, followed by wheat. Total nitrogen costs for U.S. production of corn in 2005 and wheat in 2004 were $3.66 billion and $1.02 billion, respectively. Nitrogen costs contributed to the largest operating expense for both corn and wheat producers. Nitrogen application accounted for 22 percent of the operating costs for corn producers and about 33 percent of the costs for wheat producers (table 1). In the coming years, projected increases in U.S. ethanol production from corn grain are expected to boost demand for nitrogen.
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http://www.ers.usda.gov/publications/WRS0702/wrs0702.pdf
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