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I am an agronomist for farmer owned cooperative. We have seen some softness in the market over the last few weeks in phosphates and potash. Urea has been dropping also and now anhydrous is following suit. I don't remember all of the numbers but I think we bought our first batch of urea back in June for August delivery for $370/ton and our second batch we bought in September for April/May of 2012 delivery for $520/ton. I think we can buy under $400/ton for spring delivery and it looks like it is continuing to soften.

One thing about nitrogen prices is that they are very dependent on natural gas price. The rule of thumb is that it takes 33 mmbtu of natural gas to produce one ton of anhydrous ammonia(urea should be about 20:1). I think the historical normal price of anhydrous ammonia is about 50:1. So $4 natural gas should come out to about $200 ton ammonia. The wholesale price for ammonia has been extremely high in the neighborhood of $650-$800/ton. Most of the domestic producers would be me making a killing at half that price. Anhydrous is the primary feedstock for any nitrogen fertilizer and it is also an important component of phosphate fertilizer, so in essence the cost to make fertilizer should be tied to the cost of natural gas.

When you factor in that much of the world's urea production comes from areas that have excessive natural gas and less than ideal ways to export it, the simple solution is build a nitrogen plant where you produce anhydrous ammonia and then convert ammonia to urea. Urea is a lot easier to load on a ship than ammonia or LNG, since you don't need special pressurized ships for transport. This way counties like Trinidad, Qatar, and Russia can better make use of their natural gas resources without actually having to sell natural gas. With the shift of urea production to these areas it has forced a lot of domestic production to shut down because when they were paying $8 natural gas and selling urea for $200 a ton. However, the domestic companies have done very well in the last few years and I am not sure how much longer they can keep the wide margins maintained.

I'm done rambling...

C2H5SH
No, I don't have any investments in any fertilizer or ag companies. I prefer companies that I have not a lick of knowledge.
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