1. Nitrogen Source Issues Dale Leikam Kansas State University Manhattan, KS

2. Source: Fertecon, PotashCorp World Natural Gas Costs US$9.00 Trinidad$2.50 North Africa $0.75 Russia$1.10 Indonesia$2.00 Middle East $0.75 2005F - $US/MMBtu Venezuela$0.80 W. Europe $5.80 Argentina$1.50 Ukraine$1.70 Canada$8.30

3. Urea Imports as Natural Gas $1.65 mmbtu 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 $0.65 mmbtu

5. US Fertilizer Market - 2004 (000’s tons) Production Consumption Imports Import % N 10.8 18.2 10.1 55 % P 2 O 5 11.6 6.8 0.2 3 % K 2 O 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 %

8. N Sources Anhydrous Ammonia Urea UAN Solution Ammonium Nitrate Ammonium Sulfate

9. 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.

10. Understanding and Managing Urea Containing Fertilizers

11. Urea Production Ammonia + Carbon Dioxide Urea + Water Energy (production)

12. Ammonia Volatilization Ammonia + Carbon Dioxide Urea + Water Enzyme (urease)

13. 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

14. 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

15. 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

16. McInnes, et. al Kansas State University (0.1”)

17. McInnes, et. al Kansas State University

18. 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

19. 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

20. 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