As of this writing, ammonia prices at the Gulf were $200 per ton higher than last year. What's going on? As everyone has heard by now, the cost of natural gas has ballooned from $2.37 per million British thermal unit to stand at $9.90, the steepest increase and highest price in anyone's memory. Natural gas is the primary component in producing anhydrous ammonia, accounting for 75 to 90 percent of the total cash cost of production. And anhydrous is the seed stock used to produce urea, nitrogen solution and ammonium nitrate. With those facts in mind, you begin to realize the extent of the problem faced by those of us in agriculture.

Anhydrous manufacturers buckled under the pressure. Many shut down in winter's peak production season. CF Industries, an interregional cooperative formed years ago by MFA and other regional cooperatives, limped through at half capacity. Why? Because it's unprofitable to produce anhydrous at those natural-gas prices. Manufacturers know there is a limit to what anhydrous is worth to farmers. More importantly from a manufacturer's viewpoint, foreign imports were holding prices (which were and still are high) below U.S. manufacturers' cost of production.

Manufacturers reached that price point at the height of the natural-gas frenzy. A number of them sold their supplies of natural gas to the home heating sector, pocketing a profit that exceeded what they could have made by staying operational during a normal year. Had they continued to produce, the increased supply would have caused them to lose even more money. As a direct result, U.S. ammonia production in December totaled only 983,000 tons, the lowest production level since August of 1969. In fact, ammonia production stooped to the lowest level in history, an operating rate of 56 percent of normal capacity.

The fertilizer-manufacturing industry is not blameless in this situation. Industry players for years have lobbied effectively against importation of nitrogen products even as they have continued to build offshore production facilities. Because of current U.S. policy, no nitrogen-production facilities have been built in this country in the last 25 years. With U.S. plants operating at 56 percent of capacity, you can see the potential for shortages.

But we're not helpless. MFA has been actively working with overseas producers and has developed relationships over a number of years. These established relationships give us an advantage. Plus, we are actively pursuing terminal operations on the lower Mississippi for the purpose of bringing in ocean-going vessels. We have a head start on most folks because we saw this squeeze coming. Now we need the right weather to match supply with the season. The last thing anybody in agriculture needs is weather that forces everyone into a two-week application season. If that happens, supply channels will cause a problem.

From your perspective, you should consider switching to urea, which will be far easier to obtain. Plus, talk to your MFA manager now and work out an individualized solution that matches your conditions and plans. Start your phosphate and potash application as early as possible.

Who's the culprit in this mess? Take your pick. There's plenty of blame to go around, but it's not hard to make a case against misguided government regulation and an inert federal energy policy. Fertilizer production is a small player in the natural gas market, accounting for somewhere around 3 percent of consumption. By contrast, residential demand for natural gas (which, this year, rose 18 percent compared to last year's demand) accounts for the majority. But natural-gas use to run electrical power plants is rising precipitously, from 4.3 trillion cubic feet in 1996 to 5.4 trillion cubic feet in 2000. Natural-gas-fired electrical plants now account for 16 percent of natural gas consumption, more than five times the percentage used by agricultural fertilizer. What's more, that percentage is growing rapidly.

Federal incentives like the Clean Air Act have moved electric power generation away from coal to cleaner-burning natural gas. The phenomenon is especially alarming when you notice that 98 percent of U.S. power plants under construction and 90 percent of those on the drawing board are designed to use natural gas. Even more disturbing, the electric power industry's use of natural gas is forecast to grow at an average rate exceeding 5 percent per year for the next 20 years. So we can expect natural-gas supply problems to continue.

Simultaneous with rising demand, cracks have appeared in U.S. supply lines in terms of declining production in old wells and lack of new drilling or even exploration. Again, federal policy discourages new drilling and exploration. The Wall Street Journal notes one mining company's efforts to drill for what is expected to be a sizeable supply of untouched natural gas in northern Utah. The mining company first made application to drill in 1987. The U.S. Forest Service, in what everyone has come to expect as normal government service, has been conducting an environmental impact study in the interim. They expect to have a nay or yeah by May. Folks, no government deliberation should take 14 years, especially when the nation's energy policy is at stake.

And energy policy needs serious discussion. We should all demand it. Because once again, U.S. agriculture is finding itself holding the wrong end of the stick in this supply and demand and policy mess.