The urea market (most common nitrogen fertilizer used around the globe) is suffering a major dilemna at the moment and as a result so too is agriculture. The high price and high demand for natural gas is diverting capacity away from ammonia producing plants and into ordinary households (the case in North America) or LNG (see below example)
"In Indonesia, PIM’s almost new urea plant remains shut down as locally available natural gas moves as LNG to North Asia." (www.fertilizerworks.com)
The fertilizer market will continue to suffer from this feedstock competition so long as it has less capacity to pay than higher value end markets. So prices for fertilizer are at record highs but low grain prices are translating to reduced demand from agriculture going forward (this will mean lower output this year).
The point I am trying to make is that the fertilizer market is suffering the classic symptoms of stagflation. Its price is rising but its use is declining! This is but one reason why I am bullish for grain in 2006!
