Further increases in natural gas prices could lead to a continuous decline in U.S. ammonia production, and a further increase in ammonia imports, USDA warns. According to the Economic Research Service analysis, the increase in natural gas prices between 2000 and 2005 has already cut domestic production by 44% and cut U.S. ammonia supply by 17%.

This is especially troubling with ethanol-driven demand increases for nitrogen fertilizers on additional corn acres. “Just-in-time” supply practices used by the U.S. ammonia industry to cut inventory costs could prompt further price jumps in the event of unexpected market moves, USDA says.