Since hitting a record low in mid-April natural gas futures have gained nearly 77 percent. "If high [natural] gas costs are sustained, there could be some modest margin pressure starting in 4Q, but this does not alter our positive view on nitrogen ahead of corn planting season in the U.S. in 2013," writes Citi Research analyst P.J. Juvekar.

Natural gas makes up 60 to 80 percent of fertilizer production input costs as it is used as a feedstock to make ammonia and has a direct effect on fertilizer pricing

Today the EIA released its Short-term Energy and Winter Fuels Report which expects residential demand for natural gas to increase slightly between now and March based on a colder-than-expected winter forecast for the Midwest and Eastern United States. The report projected a 1% increase over last year's nattie prices but warns that natural gas prices remain uncertain.

Soft natural gas prices have a little something for everybody. As the heating fuel of choice for the majority of Americans, low natural gas prices will help fill those Christmas stockings with savings on home heating. At the same time, low natural gas will increase margins for nitrogen producers, raising portfolio profits and placing downward pressure on farm inputs pricing in the coming spring.

As of now...

Near-month natural gas futures contract testing resistance again today at $3.51 but lacked the steam for an upside breakout -- $0.01 higher by the time it was all over to end the day at $3.48 on a volatile day's range of eight cents.

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