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Growers believe fertilizer prices stink

(denverpost) – Something about the price of fertilizer doesn't smell quite right to farmers. Growers in the Rocky Mountain region have asked the U.S. Department of Agriculture to investigate possible price fixing in the chemical-fertilizer industry.

It's not just that fertilizer prices are near record highs, farmers say. The bigger concern is that natural gas, a main feedstock for nitrogen fertilizers, is priced near a 10-year low.

Farmers believe that low prices of natural gas should be reflected in their cost of fertilizer.

The price of anhydrous ammonia, a common nitrogen-based agricultural fertilizer, has jumped 50 percent since 2006. But during the same period, natural gas prices have fallen by 60 percent.

"Historically, cheap natural gas equals cheap anhydrous ammonia," said Yuma County corn farmer Mike Bowman. "But we have seen that correlation disappear."

The Rocky Mountain Farmers Union, representing growers in Colorado, New Mexico and Wyoming, announced at a recent convention that it is asking for a price-fixing investigation.

The disconnect between natural gas and fertilizer prices "is siphoning millions of dollars from the U.S. agriculture economy," the farmers organization said in a statement.

The USDA did not respond to questions Wednesday on the farmers' concerns of price fixing. A representative of the Fertilizer Institute, a Washington, D.C., association representing the industry, did not return calls.

Farmers use chemical fertilizers made with either nitrogen, phosphorus or potassium, or they use manure.

Agriculture analysts say farmers are fighting an uphill battle for public sympathy. Prices for corn, wheat and other crops are near record highs, and even with high input costs, farmers are making money.

Fertilizer producers are setting prices based on what the market will bear, not solely on the costs of production, said Stephen Koontz, an agricultural economist at Colorado State University.

"Demand for fertilizer is quite strong," he said. "If you look just at natural gas prices, you might say, 'What's the deal?' But if you back up and look more broadly, you see that the agriculture economy has been going great guns. If supplies are tight, obviously you have to pay more. That's the way the free market works."

Koontz said changes in fertilizer costs eventually are reflected in crop and food prices, but it takes a few years for the changes to work their way through to wholesale and retail levels.

Demand for fertilizer is strong because growers in the U.S. and overseas have increased their plantings in order to capitalize on high commodity prices.

Colorado wheat farmers are less sensitive to fertilizer prices because wheat requires less than corn, said Darrell Hanavan, executive director of the Colorado Association of Wheat Growers.

For corn producers, fertilizer costs were $147 an acre in 2011, representing 44 percent of total operating costs of $332 an acre, according to the USDA.

Weld County corn farmer Dave Eckhardt said growers have little choice but to accept the prices set by fertilizer producers.

"It's kind of taken on a life of its own," he said. "Some people will look at (crop) prices and say, 'You guys can afford it.' "