Domestic Nitrogen Needs Domestic Transport

January 31, 2013 06:27 AM
 

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Anhydrous ammonia is the nitrogen product of choice on the majority of corn-growing farms. Growers recently have balked at the high price of Anhydrous, even going so far as to appeal to the USDA to investigate price-fixing allegations (click here for more). Many are concerned that the price of natural gas has fallen, but Anhydrous remains near the top of the pricing range.

In a typical year, the U.S. imports almost half of the Nitrogen it spreads. Most of that is in the form of ammonia from international markets. As a means to satisfy American fertilizer demand, a number of Nitrogen producing facilities are either rising from greenfeild projects, or expanding existing production capacity. By 2016, domestic N production is expected to service nearly 100% of U.S. N demand.

Some have pointed to the low Mississippi River this year as raising uncertainty regarding ammonia and packaged N shipments. But with new domestic production coming online, more and more Nitrogen will have to be shipped via rail. Presently, the environment for shipping Anhydrous ammonia via rail is unfavorable at best. Anhydrous qualifies as a TIH -- Toxic Inhalation Hazard -- which sets the bar high for safety standards among shippers.

Shipping rates for Anhydrous ammonia are high based on the liability associated with transporting TIH materials. Some rail lines refuse to carry the substance altogether. Those that do, fetch a premium in shipping costs.

Increased domestic nitrogen may finally couple cheap natural gas with Anhydrous ammonia pricing. But if transport via rail proves problematic and expensive, the savings in natural gas will be lost to shipping. This may serve to suppress Anhydrous demand or even have growers seeking alternative sources of Nitrogen.

While Anhydrous ammonia is a proven source of N preferred by the majority of corn producers, if rail transport in the U.S. cannot service the fresh demand, handling fees may price the nutrient out of the market, despite soft natural gas.


Photo credit: SP8254 / Foter.com / CC BY-NC-ND

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