manufacturing costs

SIOUX CITY, Iowa–(EMWNews)–Terra Industries Inc. (NYSE: TRA) announced today record net income

available to common shareholders for the 2008 second quarter of $202.2

million ($1.94 per diluted share), up from $69.4 million ($.66 per

diluted share) for the same period in 2007. For the 2008 first half,

Terra reported net income available to common shareholders of $302.3

million ($2.91 per diluted share), up from $75.3 million ($.73 per

diluted share) in the 2007 first half.

Terra also declared a dividend of $.10 per common share, payable Sept.

12, 2008, to holders of record as of Aug. 25, 2008.

Analysis of second quarter results

Revenues for the 2008 second quarter totaled $843.1 million compared to

$692.5 million for the 2007 second quarter. The 2007 revenues included

$121.2 million from Terra’s UK operations that

were later contributed to a joint venture. Excluding the 2007 UK

results, revenues increased $271.8 million from the 2007 to the 2008

second quarter, primarily due to higher nitrogen products selling

prices. Ammonia, UAN and ammonium nitrate (AN) selling prices increased

48, 48 and 25 percent, respectively, over those of the same period last

year. The improved selling prices reflect continued strong nitrogen

products demand resulting from low grain inventories and strong

commodity grain prices. North American sales volumes for ammonia and AN

increased by 13 and 8 percent, respectively, while sales volumes for UAN

decreased 4 percent. Sales volumes were affected by delayed product

movement due to cool, wet conditions and flooding throughout much of the

Midwest. UAN sales volumes were also reduced by planted corn acres that

were approximately 6 percent lower than those of 2007.

Second quarter equity earnings of affiliates of $37.6 million reflect

Terra’s interest in earnings from the GrowHow

UK joint venture. Second quarter earnings from continuing operations

were positively affected by an aggregate pretax amount of $14.2 million

($9.2 million or $0.07 per share, after tax) related to the sale of

assets.

Results of discontinued operations included $12.0 million in revenues

realized under the Beaumont facility’s methanol production contract,

which are payable when methanol margins achieve specified levels. In

2007, these revenues were recognized in the third quarter.

Analysis of first half results

Revenues for the 2008 first half totaled $ 1.4 billion compared to $1.2

billion for the 2007 first half. The 2007 revenues included $211.0

million from Terra’s UK operations that were

later contributed to a joint venture. Excluding the 2007 UK results,

revenues increased $435.4 million from the 2007 to the 2008 first half,

mostly due to higher nitrogen products selling prices. Ammonia, UAN and

ammonium nitrate (AN) selling prices increased 45, 51 and 31 percent,

respectively, over those of the same period last year. Selling prices

for the first half improved for substantially the same reasons as they

did for the second quarter. North American sales volumes for ammonia

increased by 9 percent, while sales volumes for UAN decreased 3 percent

and AN sales volumes remained stable. Sales volumes for the first half

were generally affected by the same factors affecting those of the

second quarter.

First half equity earnings of affiliates of $46.9 million reflect Terra’s

interest in earnings from the GrowHow UK joint venture.

Forward natural gas position

Terra’s forward purchase contracts at June 30,

2008, fixed prices for about 31 percent of its next 12 months’

natural gas needs at about $68 million below the published forward

market prices at that date. These forward positions hedge production

costs associated with product that Terra has sold and plans to ship

primarily in the third and fourth quarters of 2008.

Cash balances, customer prepayments and share buybacks

Cash balances, including about $92 million in customer prepayments,

totaled $752 million at June 30, 2008. Terra expects to ship products

under the prepay agreements during the 2008 third and fourth quarters.

During the 2008 second quarter, Terra repurchased 189,150 of its common

shares under its share buyback program at an average price of $39.65 per

share and a total cost of $7.5 million. The program authorizes Terra to

repurchase approximately 12.8 million shares (14 percent of its current

outstanding shares) and extends through June 30, 2010. At June 30, 2008,

approximately 12.7 million shares remained available for repurchase

under the program.

CEO’s remarks

Said Terra President and CEO Mike Bennett, “Terra

realized record earnings for the second quarter, reflecting not only a

very positive nitrogen industry environment, but also excellent

performance in all areas of the company, including our joint ventures in

Trinidad and the UK. While our costs increased due to higher natural gas

prices, continued strong product demand allowed nitrogen selling prices

to keep pace.

“Looking ahead,”

Bennett continued, “we expect this strong

demand to continue for the remainder of 2008 as customers fill their

storage capacity in anticipation of a robust spring 2009 planting and

application season. The tight global supply/demand balance for nitrogen

products has continued to put upward pressure on selling prices.

“We also look forward to restarting our

Donaldsonville, Louisiana ammonia plant in the 2008 third quarter. Once

completed, this startup will allow us to replace approximately 400,000

tons per year of imported ammonia with our own manufactured product,

thereby realizing higher margins.”

Conference call details

Terra management will conduct a conference call to discuss these second

quarter results this afternoon at 3:00 ET. A live webcast of the

conference call will be available from Terra’s

Web site at www.terraindustries.com,

and will be archived for playback for three months.

About Terra

Terra Industries Inc., with 2007 revenues of $2.4 billion, is a leading

international producer of nitrogen products.

Forward-looking statement

Certain statements in this new release may constitute “forward-looking”

statements within the meaning of the Private Litigation Reform Act of

1995. Forward-looking statements are based upon assumptions as to future

events that may not prove to be accurate. These statements are not

guarantees of future performance and involve risks, uncertainties and

assumptions that are difficult to predict. Actual outcomes and results

may differ materially from what is expressed or forecasted in these

forward-looking statements. As a result, these statements speak only as

of the date they were made and Terra undertakes no obligation to

publicly update or revise any forward-looking statements, whether as a

result of new information, future events or otherwise.

Words such as “expects,”

“intends,” “plans,”

“projects,” “believes,”

“estimates,” and

similar expressions are used to identify these forward-looking

statements. These include, among others, statements relating to:

• financial markets,

• general economic conditions within the agricultural industry,

• competitive factors and price changes (principally, sales prices of

  nitrogen and methanol products and natural gas costs),

• product mix,

• the seasonality of demand patterns,

• weather conditions,

• environmental and other government regulation, and

• agricultural regulations.

Additional information as to these factors can be found in Terra’s

2007 Annual Report/10-K, in the sections entitled “Business,”

“Legal Proceedings,”

and “Management’s

Discussion and Analysis of Financial Condition and Results of Operations”

and in the Notes to the consolidated financial statements.

Note: Terra Industries’ news announcements

are also available on its Web site, www.terraindustries.com.