Friday, June 27, 2008

Supply and Demand

The golf course industry is feeling the pain with the rising cost of energy affecting the bottom line of fertilizer budgets. Average prices that are being paid for major fertilizer nutrients have reached the highest level on record in April 2008, 228% higher than the same time eight years ago.

Natural gas is a feedstock in the production of ammonia, which is the building block for all nitrogen fertilizers. The cost natural gas accounts for 70 to 90 percent of the production cost of ammonia.

Key Factors Contributing To Dramatic Price Increases

  • U.S. Ethanol Production is Increasing Domestic Fertilizer Demand.

  • Global demand for fertilizer has placed upward pressure on fertilizer prices.

  • The U.S. ethanol boom is driving fertilizer demand higher.

  • Increased transportation costs to move fertilizer products is factoring into increased delivered fertilizer prices.

  • The value of the U.S. dollar has fallen significantly in the past few years,
    increasing the cost of Goods imported - including fertilizer.

  • High natural Gas prices in the United States continue to lead to higher
    fertilizer production costs.

    The Fertilizer Institute