Farm Foundation & USDA Office of Energy Policy

Agriculture as a Producer & Consumer

of EnergyStephen R. Wilson

President & Chief Executive Officer

Farm Foundation & USDA Office of Energy Policy

Agriculture as a Producer & Consumer

of EnergyStephen R. Wilson

President & Chief Executive Officer

June 24-25 2004

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CF Member Owners

3

Total Energy Consumed on U.S. Farms in 2002

Diesel 27%

Gasoline 9%

LP Gas 5%

Pesticides 6%

Fertilizer 28%

Electricity 21%

Natural Gas 4%

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Nitrogen Fertilizer Production

NaturalGas

“Natural gas is the primary

feedstock used in

producing nitrogen

fertilizers”

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Nitrogen Fertilizer Production

AnhydrousAmmonia

NaturalGas

Air

“The hydrogen from

natural gas is reacted

with nitrogen from the

air to produce

anhydrous ammonia.”

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Nitrogen Fertilizer Production

Nitric Acid

Urea

CO2

LiquidAm Nitrate

UANBlending

Granulation

AmmoniatedPhosphates

Phos Acid

UANSolutions

Urea

AmmoniatedPhosphates

AnhydrousAmmonia

NaturalGas

Air

Ammonia

“Ammonia is used

directly as a fertilizer or

used to produce other

forms of fertilizers”

Products

Am

Nitrate

O2

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U.S. Ammonia Cash Production Cost

$ Per Ton

0

50

100

150

200

250

95 96 97 98 99 00 01 02 03 04

Natural Gas Cost

Upgrading

8

000 TonsBeginning FY 1999 20,168

Assumed Permanent Closures 5,550

Additions to CapacityExpansions/Restarts 640Debottlenecks 489 Total 1,129

Net Change -4,421

Total 15,747

% of Capacity Permanently Closed 27.5%

U.S. Ammonia Production Capacity

Change Since 1999

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Fertilizer Prices Paid By Farmers

April Prices

50

100

150

200

250

300

350

400

450

1998 1999 2000 2001 2002 2003 2004

Ammonia

Urea

$ Per Ton

UAN 30%

10

U.S. Nitrogen Supply Million Product Tons

0

5

10

15

20

25

1998 1999 2000 2001 2002 2003 2004

OffshoreCanadaDomestic

Est

.E

st.

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U.S. Nitrogen Fertilizer Demand By Product

Million Nutrient Tons

Average 2000-03 Change

Ammonia 3.24 27.0%

Urea 3.01 25.1%

UAN 3.07 25.6%

Am. Nitrate 0.58 4.8%

DAP/MAP 1.03 8.6%

Other 1.04 8.6%

Total N Demand 11.98 100.0%

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Anhydrous Ammonia Distribution

Pipeline Rail

Truck Barge

13

Offshore Ammonia Imports – FY 2003

DAP/MAP Production

45.5%

Direct Application13%

Industrial/Upgrade

41.2%

14

Ammonia Price SpreadGulf vs. Midwest

0

20

40

60

80

100

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

Fertilizer Years 1990-Current

10-year average

Current

$/Ton

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U.S. Dry Urea Supply Million Product Tons

0

2

4

6

8

10

98 99 00 01 02 03 04

OffshoreImports

Canada

DomesticProduction

Est.

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U.S. Urea Cash Cost vs. Gulf Barge Price

$ Per Ton

0

50

100

150

200

250

J02 M M J S N J03 M M J S N J04 M M

U.S. Cash Production Cost

Gulf Barge $

17

U.S. Urea ImportsMillion Tons

0

2

4

6

94 95 96 97 98 99 00 01 02 03 04

Canada

Other

Middle East

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U.S. UAN SupplyMillion Tons 28% Equivalent

0

3

6

9

12

15

1998 1999 2000 2001 2002 2003 2004

Domestic Production

Imports

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World UAN Capacity

Source: Fertecon

United StatesUnited States

Western Europe

Western Europe

Central EuropeCentral Europe

FSUFSU

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Solutions

Comprehensive energy bill that includes a

natural gas title which addresses the

concerns of the fertilizer industry

Source: Fertecon, PotashCorp

Natural Gas Costs- $US/MMBtu- $US/MMBtu

US$6.00+

US$6.00+

Trinidad$1.40

Trinidad$1.40

Russia$0.90

Russia$0.90

Indonesia$1.20

Indonesia$1.20

Middle East$0.60

Middle East$0.60Venezuela

$0.75Venezuela

$0.75

Argentina$1.25

Argentina$1.25

Ukraine$1.50

Ukraine$1.50

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Solutions

Comprehensive energy bill that includes a

natural gas title which addresses the

concerns of the fertilizer industry

Insure that world producers using

government-controlled natural gas fully

cover their true production costs — Russia

WTO

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