Many industries are benefitting from clean, affordable and reliable natural gas. Some are obvious, like transportation and utilities. Some, like agriculture, are not as plain to see.
To explain natural gas’ role in boosting the bottom line for farmers, it comes down to a simple matter of chemistry. Natural gas is used to produce ammonia, a key ingredient in nitrogen fertilizer. Because 80 per cent of the cost of making fertilizer is natural gas, it’s closely tethered to its price and supply.
That’s why new opportunities now abound for fertilizer production as a direct result of lower natural gas prices and increased supply. And again, the consumer may also see some benefit due to lower food production costs.
Natural gas’ affordability (and future low-price trend) is accounting for a string of new fertilizer plants planned across North America. CF Industries, the world’s second largest producer, announced its plans for a $3.8-billion expansion of its U.S. facilities. The world’s largest fertilizer company, Norway’s Yara, is planning a $2-billion expansion of its plant in Belle Plaine, Saskatchewan.
Natural gas prices have also spurred fertilizer production for Canadian companies. Fertilizer giant, Agrium, has announced a $500 million expansion of its Borger, Texas operation – adding 650,000 tons to their existing production. In fact, encouraged by cheaper, future input costs, a few enterprising Canadian farmers are getting into the fertilizer game themselves. The Farmers of North America (FNA) announced a plan to build a farmer-owned fertilizer collective in Western Canada. This will allow them to invest in their own supply chain and effectively eliminate their reliance on foreign fertilizer from the Middle East, Eastern Europe and South Africa (the majority of nitrogen fertilizer is imported).
The farmers’ new plant will require at least three years to build, and is expected to be the biggest Canadian farmer venture ever undertaken. It’s further proof of natural gas’ ability to create markets and opportunity where none existed before.
Where else do you think natural gas can make a positive impact on the economy? Let us know your thoughts in the comments section provided below.