FERTILIZER PRICES STILL ON THE RISE

As much as grounds care professionals want to deny it, the price of fertilizer is still inching upward. Two factors causing high prices are tight supplies of nitrogen fertilizer and high-priced natural gas, which is used as a feedstock in the production of anhydrous ammonia that is the starting point for production of must commercial nitrogen fertilizers. Natural gas serves as a source both for energy in the reaction and for the hydrogen that is combined with nitrogen (N) from the atmosphere to produce anhydrous ammonia (NH3). In short, as the cost of natural gas increases, so does the cost of most commercial fertilizers.

Natural gas prices are likely to remain close to $5 per thousand cubic feet (mcf) this year. Composite prices averaged about $6.10 per mcf in January and about $4.90 in February. For 2004 as a whole, natural gas spot prices are expected to average about $5.20 per mcf.

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In 2004, natural gas demand is expected to increase by about 2.6 percent due to growth in the economy. Demand in 2005 is forecasted to increase by 0.4 percent as the economy continues to expand, with expected reductions in weather-related demand in the first quarter of 2005 relative to the first quarter of 2004, lessening the overall growth rate next year. Natural gas production is estimated to have increased approximately 2.2 percent in 2003 and is expected to continue to through 2005.

U.S. Energy Supply and Demand
Product Year Annual Percentage Change
2003 2004 2005 2002-2003 2003-2004 2004-2005
Natural Gas (Trillion cubic feet) 21.97 22.54 22.64 -4.5 2.6 0.4
Source: Energy Information Administration

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