Nitrogen Source Issues

Dale LeikamKansas State University

Manhattan, KS

Source: Fertecon, PotashCorpSource: Fertecon, PotashCorp

World Natural Gas CostsWorld Natural Gas Costs

USUS$9.00$9.00

TrinidadTrinidad$2.50$2.50

North AfricaNorth Africa$0.75$0.75

RussiaRussia$1.10$1.10

IndonesiaIndonesia$2.00$2.00

Middle EastMiddle East$0.75$0.75

2005F - $US/MMBtu2005F - $US/MMBtu

VenezuelaVenezuela$0.80$0.80

W. EuropeW. Europe$5.80$5.80

ArgentinaArgentina$1.50$1.50

UkraineUkraine$1.70$1.70

CanadaCanada$8.30$8.30

Urea Imports as Natural Gas

$1.65mmbtu

Middle East$0.75 mmbtu

Trinidad/Venezuela$1.10 mmbtu

Offshore Landed

$1.75 - $3.50

Indonesia$1.60 mmbtu

$1.50 - $1.90 mmbtu

$0.65mmbtu

US Ammonia Production and Imports

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004e

Production

Imports for consumption

US Fertilizer Market - 2004 (000’s tons)

Production Consumption Imports Import %

N 10.8 18.2 10.1 55 %

P2O5 11.6 6.8 0.2 3 %

K2O 1.0 7.1 6.4 90 %

Ammonia 13.2 21.4 7.9 37 %

Urea 3.7 8.4 5.4 64 %

N-Solution 9.9 12.2 2.3 19 %

Kansas Nitrogen Product Consumption(% of total N)

0%

10%

20%

30%

40%

50%

2000 2001 2002 2003 2004

Year

% O

f T

ota

l N

AmmoniaUANUreaAmmonium Nitrate

U.S. Nitrogen Product Consumption

Ammonium Nitrate 12,525 Tons N Decrease per Year

Urea 60,201 Tons N per Year Increase

UAN 51,527 Tons N per Year Increase

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

1978 1983 1988 1993 1998 2003Year

To

ns

Nit

rog

en

Amm NitrateSolutionUreaAmmonia

N Sources

• Anhydrous Ammonia

• Urea

• UAN Solution

• Ammonium Nitrate

• Ammonium Sulfate

News Release

Agrium to switch out of agricultural ammonium nitrate in favor of other nitrogen products

CALGARY, Alberta -- Agrium Inc. (TSX and NYSE: AGU) announced today it will discontinue production and sales of agricultural grade ammonium nitrate.  This decision was made as part of our ongoing process to optimize returns from our base business and to reduce potential exposure related to security concerns.  Agrium anticipates previous sales of agricultural ammonium nitrate will be largely replaced by increased sales of other products, primarily from our low cost Alberta-based facilities.  As a result, this decision will not have any material effect on either our earnings or capital asset net book value. 

Agrium Wholesale sold approximately 300,000 tonnes of agricultural ammonium nitrate in 2004 produced at three facilities.  These sales represented less than two percent of Agrium’s Wholesale fertilizer gross profit in 2004.  The Homestead, Nebraska ammonium nitrate facility will continue to operate as a distribution terminal for ammonia and other nitrogen products.  The Kennewick, Washington nitrogen facility, will concentrate on the production of nitrogen solutions.  The Redwater, Alberta facility will increase production of other nitrogen products. 

Agrium’s Retail operations will also no longer market ammonium nitrate and anticipate replacing these sales with increased sales of other nitrogen products such as urea, nitrogen solutions and Agrium’s ESN product.  Agrium’s retail sales of ammonium nitrate typically average approximately thirty thousand tonnes per year, accounting for less than one percent of sales. 

Understanding and Managing Urea Containing Fertilizers

Urea Production

Ammonia + Carbon Dioxide

Urea + Water

Energy (production)

Ammonia Volatilization

Ammonia + Carbon Dioxide

Urea + Water

Enzyme (urease)

Factors Affecting Hydrolysis Rate

Soil urease concentration– More urease present greater hydrolysis rate

– Urease concentration correlated to soil organic matter content

– Crop residue has 20—30 times higher urease concentration than underlying soil

Factors Affecting Hydrolysis Rate

Soil temperature

– Hydrolysis rate increases with higher temperature

– 44°F 80°F ; hydrolysis rate doubles

– Very little ammonia loss with cool temperatures

– Interacts with soil water content

Factors Affecting Hydrolysis Rate

Soil water content

– Greatest effect on urea hydrolysis when soil becomes dry

•Little change with soil moisture contents suitable for plant growth

•At permanent wilting point the hydrolysis rate slows greatly and essentially stops when air dry

•High temperatures dries the surface soil

McInnes, et. al Kansas State University

(0.1”)

McInnes, et. al Kansas State University

Factors Affecting Volatilization Potential of Surface Applied Urea

• Unincorporated surface applications• Warm, moist, drying soil conditions• Crop residues

• • • Sandy soils, low buffering capacity• High soil pH

N Source Method Yield (bu/a) Leaf N

Ammonium Nitrate Broadcast 104 2.19%UAN Solution Broadcast 97 1.97%UAN Solution Knife 111 2.28%

Lamond, KSU

N Management Eff ect On Grain Sorghum

Differences in N source performance are not just due to ammonia

volatilization

Tie-up by decomposing crop residues (immobilization) also

affects N recovery by crops

N Fertilizer Management

Ammonium nitrate is not a viable option

Applying N fertilizers below soil surface is always a best management practice

However, surface application is a preferred overall management option for many growers

New technologies (Agrotain, coatings, etc.)

Manage around potential volatilization loss and immobilization– Make applications when temperatures are cool

– Dry soil conditions

– Surface dribble (strip) applications