Fertilizer Demand in US Expected to Rise Due to Ethanol

HOUSTON - Corn prices are at record highs due to the boom in ethanol production and this spring U.S. farmers are expected to plant record corn acreage but with it comes higher fertilizer costs which is expected to increase until production catches up with demand.

Already prices for urea and two types of ammoniated phosphate known as MAP and DAP have risen by up to $80 a ton.

Nick Drew from the Fertilizer Industry Federation of Australia says U.S. growers are continuing to increase their fertilizer use as they expand corn plantings to supply ethanol plants.

But he says it is not clear how much higher prices will go.

“It’s a brave man who can forecast exactly where things are going,” Drew said. But one company in the US is stepping up to the plate to do something about it, though admittedly, they’re still several years away.

This morning Reno-based Itronics, Inc. (OTCBB:ITRO) announced steps to expand its environmentally friendly GOLD’n GRO fertilizer brand nationally for use on corn crops. That process is a long, drawn out affair, having to first go through independent tests usually through a respected University and that is precisely what the enviro-ag company did.

Research being conducted at Utah State University is demonstrating the effectiveness of Itronics’ fertilizer on corn. Itronics first got involved in the Zinc Nutrition Research Program at the University in August 2006.

“Presently the main area where Itronics is selling its GOLD’n GRO Zinc fertilizer is in the central valley in California,” explained Itronics Chairman, Dr. John Whitney. Whitney said that “growers there are planning on shifting some of the cotton acreage to grain corn production.”

But California is only the beginning.

“We see a promising role for GOLD’n GRO fertilizers in meeting nutritional needs for the expanding U.S. corn crop,” said Whitney. “The rapidly rising demand for ethanol, which is derived from corn, requires increased acreage and yields.”

According to the USDA, with farmers looking to expand corn acreage it’s likely that prices will remain stable. But in looking deeper into the facts behind ethanol production the number of plants is expected to rise and along with it, higher demand for corn.

In a speech at the USDA Agricultural Outlook Forum 2007 on March 1, Keith Collins, Chief Economist with the Department, called this year’s U.S. crop production “profound” thanks in large part to biofuel coupled with increased food crop demand globally.

“For the current marketing year, we expect corn ethanol use will reach 2.15 billion bushels and increase 50 percent to 3.2 billion bushels in 2007/08. This sharp increase in corn demand is reducing corn carryover and driving up corn prices,” said Collins.

Corn planted area for 2007 is now expected to increase 8.7 million acres to 87 million, slightly above the level reported in USDA Agricultural Projections to 2016, released February 14, 2007. This would be the highest corn plantings in more than 60 years (since 1946).

Corn production is expected to reach a record 12.2 billion bushels in 2007. Nevertheless, production could once again fall short of demand, pulling ending stocks down further in 2007/08 and propelling corn farm prices even higher. Farm prices are expected to average a record-high $3.60 per bushel for the 2007 crop, up $0.40 per bushel from this year’s expected price, Collins explained.

Yet according to the Renewable Fuels Association (RFA), which also presented at the USDA Forum, 114 ethanol plants are already in operation across a 19-state area, with a 5.5 billion gallon a year capacity (as of February, 2007) and another 78 plants are under construction with 8 plants under expansion. The RFA says that once those ethanol plants are online, production will grow by another 6 billion gallons a year and by 2008, ethanol production is forecast to grow by another 2.2 billion gallons a year. So if those forecasts hold true, Collins is way off his future production estimate which will keep fertilizer prices rising well into the 2008 planting season.

For Itronics, this could be a windfall once it readies for market. The Reno-based enviro-ag company has the only EPA approved plant in the United States to manufacture its environmentally friendly fertilizer and according to Whitney the raw supplies needed to manufacture GOLD’n GRO can meet the company’s plans of supplying corn farmers nationwide.