Friday, March 31, 2006

Why corn ethanol is a bit of a Catch-22.

Hmm.. 'Rising fertilizer' costs, eh? Where does fertilizer come from again?

Gotchas like this are part of the reason that Brazil uses sugar, which is a more efficient way to generate ethanol.

Bloomberg: Corn Prices Soar as Survey Shows U.S. Farmers to Cut Acres on Higher Costs.


March 31 (Bloomberg) -- Corn prices in Chicago rose the most in seven months after the U.S. said farmers will sow the fewest acres since 2001 because of rising fertilizer costs. Soybeans fell as growers said they will plant the most ever.

Corn will be planted on 78.019 million acres, down 4.6 percent from last year, a government survey of 87,000 farmers showed. Analysts expected a 1.5 percent decline, based on the average of 25 estimates in a Bloomberg survey. Farmers may shift to soybeans because of higher costs to fertilize corn in the U.S., the world's largest producer and exporter of both crops.

``Prices have to rise to buy more acres,'' said Dale Durchholz, an analyst for AgriVisor Services Inc. in Bloomington, Illinois. ``This was a huge surprise.''


``Corn is the most fertilizer-intensive of major crops, accounting for approximately 40 percent to 45 percent of each of the three main fertilizer nutrients,'' nitrogen, phosphate and potassium, Silver said in his report. The reduction in corn plantings ``reflects factors including lower farm income, higher fuel and fertilizer costs, and excessive dryness in soil conditions in the southern Plains states,'' Silver said.