Farm Foundation & USDA Office of Energy Policy Agriculture as a Producer & Consumer of Energy Stephen R. Wilson President & Chief Executive Officer June

1 CF Member Owners

2 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%

3 Nitrogen Fertilizer Production Natural Gas “Natural gas is the primary feedstock used in producing nitrogen fertilizers ”

4 Nitrogen Fertilizer Production Anhydrous Ammonia Natural Gas Air “The hydrogen from natural gas is reacted with nitrogen from the air to produce anhydrous ammonia.”

5 Nitrogen Fertilizer Production Nitric Acid Urea CO 2 Liquid Am Nitrate UAN Blending Granulation Ammoniated Phosphates Phos Acid UAN Solutions Urea Ammoniated Phosphates Anhydrous Ammonia Natural Gas Air Ammonia “Ammonia is used directly as a fertilizer or used to produce other forms of fertilizers” Products Am Nitrate O2O2

6 U.S. Ammonia Cash Production Cost $ Per Ton Natural Gas Cost Upgrading

7 000 Tons Beginning FY ,168 Assumed Permanent Closures5,550 Additions to Capacity Expansions/Restarts640 Debottlenecks 489 Total1,129 Net Change-4,421 Total15,747 % of Capacity Permanently Closed27.5% U.S. Ammonia Production Capacity Change Since 1999

8 Fertilizer Prices Paid By Farmers April Prices Ammonia Urea $ Per Ton UAN 30%

9 U.S. Nitrogen Supply Million Product Tons Est.

10 U.S. Nitrogen Fertilizer Demand By Product Million Nutrient Tons Average Change Ammonia % Urea % UAN % Am. Nitrate % DAP/MAP % Other % Total N Demand %

11 Anhydrous Ammonia Distribution PipelineRail Truck Barge

12 Offshore Ammonia Imports – FY 2003 DAP/MAP Production 45.5% Direct Application 13% Industrial/ Upgrade 41.2%

13 Ammonia Price Spread Gulf vs. Midwest Fertilizer Years 1990-Current 10-year average Current $/Ton

14 U.S. Dry Urea Supply Million Product Tons Offshore Imports Canada Domestic Production Est.

15 U.S. Urea Cash Cost vs. Gulf Barge Price $ Per Ton U.S. Cash Production Cost Gulf Barge $

16 U.S. Urea Imports Million Tons Canada Other Middle East

17 U.S. UAN Supply Million Tons 28% Equivalent Domestic Production Imports

18 World UAN Capacity Source: Fertecon United States Western Europe Central Europe FSU

19 Solutions Comprehensive energy bill that includes a natural gas title which addresses the concerns of the fertilizer industry

Source: Fertecon, PotashCorp - $US/MMBtu Natural Gas Costs - $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 $0.60 Venezuela $0.75 Venezuela $0.75 Argentina $1.25 Argentina $1.25 Ukraine $1.50 Ukraine $1.50

21 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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