Pinched ammonia supplies from Trinidad add to US farmer pain ahead of elections

By Curtis Williams and Ed White

HOUSTON/WINNIPEG, Manitoba, Nov 2 (Reuters) - Fertilizer prices are surging in the United States, as falling exports from Trinidad and Tobago add to a tight global market, raising costs for farmers and contributing to Republican political vulnerability in the farm belt ahead of Tuesday's midterm elections.

The increase adds pressure on food producers facing sky-high diesel prices during the autumn harvest season and disappointment over China's slow demand for US grains and meat.

Midwest ammonia prices climbed more than 30% between late June and early October, rising from about $600 per short ton to around $800, industry analysts said. Prices have since climbed to around $875 per short ton, said Justin Ratcliff, principal North American fertilizer analyst at commodities consultancy CRU.

Ammonia is used to make nitrogen fertilizer, a critical input for corn and other crops.

A tightening global market is driving the increase, including supply shocks in the Middle East and years of declining production in Trinidad and Tobago, historically a major supplier to US agriculture.

Trinidad is the second-largest supplier of ammonia to the US after Canada, but its industry has been steadily constrained by a shortage of natural gas used to make ammonia fertilizer.

Trinidad's natural gas production has declined because of aging fields and limited new discoveries. Until early this year, when the US arrested former Venezuelan President Nicolas Maduro, the island was unable to buy gas from neighboring Venezuela because of sanctions.

Analysts expect the country's constraints to worsen after Nutrien, a major fertilizer producer, indefinitely shut down its nitrogen operations in Trinidad last month due to continuing gas supply problems.

Usually, much of the US supply of anhydrous ammonia comes from Trinidad into the Gulf of Mexico and is transported by barge up the US river system to farmers, said Josh Linville, vice president of fertilizers at consultancy StoneX. When supply is lost in an already tight global market, the effects ripple throughout the fertilizer supply chain.

Ammonia imports from Trinidad into the US have dropped about 34% this year, said Veronica Nigh, chief economist at The Fertilizer Institute, an industry group.

"Normally we would expect to see that backfilled with tons from other locations, which is what we saw last year," she said. "We just haven't seen that this year."

Over the last decade, the US has become less dependent upon Trinidadian ammonia because of an expansion in local production. But operational issues at some newer plants have limited the industry's ability to make up for lost imports, Ratcliff said.

President Donald Trump announced an $8 billion financial support program last month to offset diesel costs for farmers. However, farm groups in Iowa, Ohio and Texas warned him in a letter last week that rising fertilizer costs were eroding his efforts as ammonia demand peaks during the autumn application season.