ANNOUNCEMENT
The Andersons Pricing for 2006 Fertilizer Products

October 6, 2005

The Andersons is currently developing pricing for our turf fertilizer products for 2006 and will release the appropriate price lists to customers soon. While the calculations are not complete, it is clear that the cost increases the fertilizer industry is seeing are unprecedented. End users of all kinds are going to want to know “why”, even if they are expecting the increases.

The reasons are many, complicated and evolving. I will attempt to summarize them in the following paragraphs.

N - Nitrogen – The dominant source of nitrogen is urea. Urea is produced from ammonia, which is in turn produced from natural gas. The natural gas market is at a historical high right now for a variety of reasons. Therefore, the cost of producing urea is at an all-time high. Hurricane damage is only a part of the problem. Other reasons are contributing, particularly worldwide demand for urea and increasing transportation costs. While there is normally some seasonal price fluctuation in the urea market, we expect urea to remain at seasonally adjusted high prices at least into the second half of 2006. Urea may actually get even more expensive short-term.

P - Phosphorus – The phosphorus components in fertilizers (diammonium phosphate, or “DAP” being the largest) are also trending upward cost-wise. They contain a certain percentage of nitrogen, which is getting more expensive. Worldwide demand and the high costs of transportation and energy are being felt here, too. Phosphorus cost is not a major factor in fertilizers with the exception of high phosphorus “starter” fertilizers.

K - Potassium – Like phosphorus, worldwide demand and the cost increases caused by transportation and energy increases are putting substantial pressure on the market, Unlike phosphorus, a reduction of major potassium chloride producers (of product suitable for turf use) in the U.S. from three to two is also contributing, as a historic over-supply situation that held pricing down is now over. Potassium sulfate will be affected, also, as the market price for it tends to track potassium chloride. At the moment, potassium is the largest contributor to fertilizer producers’ cost increases.

Adjuvants / Solvents / Micronutrients / Packaging – These items are normally considered to be minor in effect, and they are. However, petroleum based items in particular have increased substantially in cost. Transportation cost increases can be felt here, also. Plastic packaging in particular has experienced cost increases.

Transportation – As long as fuel costs remain high and the overall demand for transportation by a growing U.S. economy remains strong, higher transportation costs will be real. Fertilizer raw materials and fertilizer finished goods are both susceptible to these increases due to their low cost/ weight ratios.

Our industry needs to work in conjunction with our supply chain partners to communicate the necessity for higher prices in 2006. We will work where we can to mitigate and minimize the increases. If you have questions, please let us know - we will help where we can. Thank you for your business and your support.

Michael E. Bandy
Marketing Manager