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More proof fertilizer's headed higher

Jeff Caldwell 07/19/2011 @ 10:28am Multimedia Editor for Agriculture.com and Successful Farming magazine.

After recent reports showing a growing number of farmers taking out operating loans to cover crop inputs, it sounds like one of the biggest variables in the input cost equation could be on the front end of another sharp price surge.

Monday's stock trade saw a sharp upswing in price for shares of the Terra Nitrogen Company (TNH). In Monday's trade, TNH shares almost 3% and "broke out from a 2-week consolidation range" to post an all-time high price of $142 per share, according to Barchart.com.

Terra Nitrogen, with its main nitrogen manufacturing facility in Oklahoma, makes and markets nitrogen fertilizer and methanol in the U.S., Canada and the United Kingdom "for agricultural and industrial customers," according to Barchart.com. The company produces around 1.9 million tons of urea ammonium nitrate (UAN) solutions and 1.1 million tons of ammonia, according to the company's website.

But, is the price spike indicative of growing demand and cost for farmers, or is farmer behavior changing when it comes to inputs like fertilizer? Sure, prices are high, but farmers may be changing their buying behavior to fend off rising costs, says Agriculture.com Farm Business Talk member hardnox604008.

"I think producers are carrying more inventory as 1) it has paid, and 2) they seek to manage tax liability," he says. "Inventories can be a pretty slippery asset from a lender's point of view, but I don't think they're too worried about it at present."

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