WASHINGTON - (VIA the OilDrum) "When energy prices were very, very low, you couldn't compete," he said. But natural gas prices have increased over recent years, driving many U.S. fertilizer companies to close their doors because natural gas prices overseas were lower. Today more than half the country's nitrogen fertilizer is imported, and about 20 percent of the imports are from Russia.
Natural gas is used to make ammonia, the basic component for nitrogen fertilizer. Prices for natural gas rose dramatically in the U.S. over the past 10 years, according to the U.S. Department of Agriculture. Because natural gas is cheaper in other countries, the U.S. has increasingly turned to foreign supplies for ammonia since 1990.
"We don't relish being in Ukraine's shoes," Oswald said, referring to Russia's embargo on natural gas supplies to its neighbor during the winter.
The cost of natural gas now accounts for up to 90 percent of the cost of making nitrogen fertilizer, according to the U.S. Government Accountability Office. Last year, when natural gas prices rose, so did the cost of fertilizer, one of farmers' biggest expenses.
SynGest says its plan to build small plants in the Midwest to make fertilizer from corncobs would eliminate the price volatility farmers have had to put up with and help ensure that U.S. farmers won't face a shortage.
High natural gas prices, like last year's, would make the SynGest process profitable, but currently natural gas is relatively low and likely to be the cheapest raw material to produce nitrogen, said Wen-yuan Huang of the U.S. Department of Agriculture's Economic Research Service...
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