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June 24-25 2004

Farm Foundation & USDA Office of Energy Policy Agriculture as a Producer & Consumer of Energy Stephen R. Wilson President & Chief Executive Officer. June 24-25 2004. CF Member Owners. Total Energy Consumed on U.S. Farms in 2002. Pesticides 6%. Diesel 27%. Fertilizer 28%. Gasoline

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June 24-25 2004

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  1. Farm Foundation & USDA Office of Energy PolicyAgriculture as a Producer & Consumer of EnergyStephen R. WilsonPresident & Chief Executive Officer June 24-25 2004

  2. CF Member Owners

  3. Total Energy Consumed on U.S. Farms in 2002 Pesticides 6% Diesel 27% Fertilizer 28% Gasoline 9% LP Gas 5% Electricity 21% Natural Gas 4%

  4. Nitrogen Fertilizer Production “Natural gas is the primary feedstock used in producing nitrogen fertilizers” NaturalGas

  5. Nitrogen Fertilizer Production “The hydrogen from natural gas is reacted with nitrogen from the air to produce anhydrous ammonia.” AnhydrousAmmonia NaturalGas Air

  6. Nitrogen Fertilizer Production Products Ammonia O2 Nitric Acid Am Nitrate LiquidAm Nitrate UANSolutions UANBlending NaturalGas AnhydrousAmmonia Urea Air Urea Granulation CO2 “Ammonia is used directly as a fertilizer or used to produce other forms of fertilizers” AmmoniatedPhosphates AmmoniatedPhosphates Phos Acid

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

  8. U.S. Ammonia Production Capacity Change Since 1999 • 000 Tons • Beginning FY 1999 20,168 • Assumed Permanent Closures 5,550 • Additions to Capacity • Expansions/Restarts 640 • Debottlenecks 489 • Total 1,129 • Net Change -4,421 • Total 15,747 • % of Capacity Permanently Closed 27.5%

  9. Fertilizer Prices Paid By FarmersApril Prices $ Per Ton Ammonia Urea UAN 30%

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

  11. U.S. Nitrogen Fertilizer Demand By Product Million Nutrient Tons Average2000-03Change Ammonia 3.24 27.0% Urea 3.01 25.1% UAN 3.07 25.6% Am. Nitrate 0.58 4.8% DAP/MAP 1.03 8.6% Other 1.04 8.6% Total N Demand 11.98 100.0%

  12. Anhydrous Ammonia Distribution Pipeline Rail Barge Truck

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

  14. Ammonia Price SpreadGulf vs. Midwest $/Ton Current 10-year average Fertilizer Years 1990-Current

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

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

  17. U.S. Urea ImportsMillion Tons Other Middle East Canada

  18. U.S. UAN SupplyMillion Tons 28% Equivalent Imports Domestic Production

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

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

  21. Natural Gas Costs- $US/MMBtu Russia $0.90 US $6.00+ Ukraine $1.50 Middle East $0.60 Trinidad $1.40 Venezuela $0.75 Indonesia $1.20 Argentina $1.25 Source: Fertecon, PotashCorp

  22. 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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