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Higher gas prices feeding energy woes

The National Corn Growers Association cited a recent report by the U.S. General Accounting Office that the cost of natural gas – a key component in the production of nitrogen – accounts for up to 90 percent of nitrogen fertilizer production costs as more evidence of the need for the legislation.

“When natural gas prices in this country increased in late 2000 and early 2001, U.S. fertilizer producers reported financial losses resulting from the significant increase in their costs of producing nitrogen fertilizer,” The GAO report says.

“These higher production costs also made it difficult for U.S. producers to compete with foreign nitrogen fertilizer producers, who could buy natural gas at lower prices and export their products to the United States.”

The report said that, according to fertilizer industry officials, higher natural gas prices in 2003 are again having a negative financial impact on the U.S. nitrogen fertilizer industry, threatening to irreversibly cripple it. As a result, farmers are facing the prospects of much higher nitrogen fertilizer prices for 2004.

“The study confirms what NCGA and other supporters of the energy bill, the administration and leaders of Congress have been saying – that the United States needs a comprehensive energy plan that provides reasonably priced energy for our economy to grow,” said NCGA President Dee Vaughan.

Noting the fact that the fertilizer industry is dependent on the price of natural gas, Vaughan said corn farmers are, in turn, very sensitive to the price of nitrogen fertilizer. “We need to maintain both domestic and international sources of nitrogen in order to have a stable market,” he said.

"We are hoping the energy bill conferees will consider the detrimental impact high energy costs are having on the agricultural economy," Vaughan said. "It's time to pass a comprehensive energy bill that benefits corn farmers and the entire U.S. economy – an energy bill that develops the nation's energy supply, including renewables, like ethanol."

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