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2 years ago

Ethanol Fertilizer and Higher Natural Gas Prices

About 96 percent of the corn planted in the usa is dependent upon fertilizers, for example Anhydrous Ammonia (NH3), 28pct-Liquid Nitrogen, Urea and Ammonium Sulfate. Fertilizers consume in excess of three percent of total Usa natural gas use. The ethanol boom could dramatically impact gas prices.

Some 90 % of the price tag on manufacturing nitrogen fertilizer is dependent upon the cost of gas. The greater fertilizer produced, the greater number of gas is commonly used along with the higher both eventually cost. And as outlined by widely followed natural gas commentator Phil Flynn of Chicago-based Alaron Trading, "Ethanol plants will likely require gas consumption to make electricity." Flynn hadn't yet conducted a report into simply how much natural gas consumption will be needed for these plants, but said in a telephone interview that they might be pursuing this.

We asked Flynn in the event the ethanol mania would have any influence over natural gas prices. "Absolutely," he responded, citing that increased corn planting would require gas for the nitrogen-based fertilizers as well as power the 116 existing ethanol plants. Another 78 plants are actually being constructed. Flynn pointed out natural gas prices would benefit from the 'front and back end' of your ethanol boom.

Nearly 95 percent of U.S. ethanol distilleries use natural gas boilers. Citigroup analyst Gil Yang estimated 28 billion cubic feet of gas would be consumed for every single one billion gallons of ethanol produced. Cumulative ethanol production could surpass 12 billion gallons. Some analysts are predicted a great all natural gas demand increase as much as one percent in the ethanol boom. However their estimates will not include increased fertilizer demand to increase corn yields.

Record Corn Planting and Natural Gas

Corn acreage is among the largest consumers of nitrogen-based fertilizer. As a result of the current ethanol subsidies, more corn are going to be planted this current year than ever before six decades. As reported by the United states Department of Agriculture, corn growers wish to plant 90.5 million acres in 2007. Because forecasts of ethanol production are anticipated to raise, expect more corn to be grown. In 2008, about 25 % of U.S. corn production is planned to make ethanol. By 2012, 4.3 billion bushels of corn are anticipated for ethanol production. It takes approximately 450 pounds of corn to create 25 gallons of ethanol fuel to power an SUV.

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The current ethanol boom has developed into blessing for fertilizer companies in addition to their share prices. Since this past summer, shares in Saskatchewan-based Potash Corp have more than doubled to a record $191.46/share. The corporation may be the world's largest potash producer plus a significant producer of nitrogen fertilizers. Shares in Illinois-based CF Industries have nearly tripled within the same period. This company manufactures both nitrogen and phosphate fertilizers. Have taken advantage of relatively lower natural gas prices during the face of strong demand for their products.