U.S. ammonia squeeze lifts fertilizer costs for farmers ahead of midterm elections

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U.S. ammonia squeeze lifts fertilizer costs

Highlights

Midwest ammonia prices surged over 30% from late June to October, reaching about $875 per short ton amid Trinidad supply constraints and global disruptions.
Ammonia imports from Trinidad into the U.S. are down approximately 34% this year due to natural gas shortages and Nutrien's nitrogen plant shutdown.
Rising fertilizer costs, compounded by operational issues at U.S. plants and high diesel prices, intensify economic pressure on farmers ahead of Tuesday's midterm elections.

Trinidad supply constraints tighten U.S. fertilizer market

As reported by Reuters, ammonia prices in the U.S. are climbing as lower exports from Trinidad and Tobago compound an already tight global market. Midwest ammonia prices rose more than 30% between late June and early October, moving from about $600 per short ton to around $800, and have since reached about $875 per short ton, according to Justin Ratcliff, principal North American fertilizer analyst at CRU.

Ammonia is a core feedstock for nitrogen fertilizer used on corn and other crops. The market is being squeezed by supply disruptions in the Middle East and by years of declining production in Trinidad, historically one of the main suppliers to U.S. agriculture.

Trinidad is the second-largest supplier of ammonia to the U.S. after Canada, but its output has been constrained by shortages of natural gas, the main input for ammonia production. Analysts expect those problems to deepen after Nutrien indefinitely shut its nitrogen operations in Trinidad last month because of continuing gas supply issues.

Josh Linville, vice president of fertilizers at StoneX, said a large share of U.S. anhydrous ammonia normally arrives from Trinidad through the Gulf of Mexico before moving by barge up the U.S. river system to farms. When those volumes are lost in a tight market, the effects spread across the fertilizer supply chain.

Higher input costs add to political and farm belt pressure

Ammonia imports from Trinidad into the U.S. are down about 34% this year, according to Veronica Nigh, chief economist at The Fertilizer Institute. She said the market would normally be expected to replace those lost tons from other origins, but that has not happened this year.

Over the past decade, the U.S. has reduced its dependence on Trinidadian ammonia as domestic production expanded. But operational problems at some newer U.S. plants have limited the sector's ability to fully offset lower imports, Ratcliff said.

The increase in fertilizer prices adds to pressure on food producers already dealing with elevated diesel costs during the autumn harvest. It also carries political weight in the farm belt before Tuesday's midterm elections, despite President Donald Trump's $8 billion support program announced last month to help offset diesel expenses.

Farm groups in Iowa, Ohio and Texas warned in a letter last week that rising fertilizer costs are undermining that relief effort as ammonia demand peaks during the fall application season.

In our earlier report on the UN-backed plan to move fertilizer through the Strait of Hormuz, we explained that the mechanism could restart flows via an Oman coordination hub only if the U.S. and Iran reached an agreement. We also noted that continued delays were keeping Gulf fertilizer shipments largely halted, risking sharper price spikes and adding to food-security pressures in import-dependent parts of Asia and Africa as planting windows approach.

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