18 September 2007 02:34 [Source: ICIS news]
HOUSTON (ICIS news)--Business conditions for the fertilizer industry will remain buoyant for the next few years due to biofuels demand, low global grain stocks, and limited new supply of nitrogen fertilizer, Canadian producer Agrium said on Monday.
"Farmers are making money. They are planting from fence post to fence post," chief financial officer Bruce Waterman said.
The biofuels boom will underpin crop prices as ethanol plants in particular expand their consumption of corn in the US, Waterman told investors at a Bank of America conference in San Francisco.
In the 2008-2009 crop season, ethanol plants would consume around one third of the US corn crop, Waterman said.
On 12 September, the US Department of Agriculture revised its forecasts for corn use to show the ethanol industry would consume 23% of the corn supply in 2007-2008, compared with 17% in 2006-2007 and 12% in 2005-2006.
The support for corn prices has spilled over to other crops such as wheat, giving the farm sector a broad boost and lifting fertilizer demand, Waterman said.
Global grain stocks are down to their lowest levels in modern history, he said.
Apart from the biofuels impact, the growth of the middle class in Asian societies has also put the world into a grain deficit, with consumption outstripping supply.
"It's something that can't go on forever," Waterman said.
He also noted that the biofuels factor is not limited to the US, with the wave also lifting demand for canola in Canada, palm oil in Malaysia and sugar cane in Brazil.
Calgary-based Agrium has a 60% stake in a nitrogen plant in Egypt that is due to start up in 2010.
Waterman said that looking ahead, Agrium would be focusing on expanding its North American import and distribution business, including adding warehouses, terminals and barges. He did not give details.Waterman's presentation was broadcast via a webcast.
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