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Ethanol, fertilizer, and higher natural gas prices

What does growing corn and other crops have nothing to do with gas? It takes about 33,000 cubic meters of natural gas to one ton of nitrogen fertilizer to produce. About 96 percent of the existing corn in the United States depends on fertilizers, such as ammonia (NH3), 28pct-Liquid Nitrogen, Urea and ammonium sulfate. Fertilizers consume more than three percent of total U.S. natural gas use. The ethanol boom could dramaticallyImpact natural gas prices.

About 90 percent of the cost for manufacturing nitrogen fertilizer depends on the price of natural gas produced. The more fertilizer, the more gas will be used, and ultimately higher costs. And according to widely followed natural gas based commentator Phil Flynn of Alaron Trading in Chicago, "ethanol plants will need natural gas to produce the consumptionElectricity. "Flynn had no study on how much natural gas consumption of these plants must be included, but he said in a telephone interview that he might be pursuing them.

We asked Flynn if the ethanol mania would have any effect on gas prices. "Absolutely," he said, citing that increased corn planting would be natural gas for the nitrogen fertilizer need and to the 116 existing powerEthanol plants. Another 78 plants are now built. Flynn pointed out that gas prices would benefit from the "front-and back-end" of the ethanol boom.

Almost 95 percent of U.S. ethanol distilleries use natural gas boilers. Citigroup analyst Gil Yang estimated 28 billion cubic meters of natural gas would be produced and consumed for every one billion gallons of ethanol. Cumulative ethanol production could exceed 12 billionGallon. Some analysts predicted a demand for natural gas by up to one percent of the ethanol boom. But their estimates do not include increased demand for fertilizer to increase maize yields.

Record Corn Planting and Natural Gas

Corn acreage is one of the largest consumer of nitrogen fertilizer on. And because of the recent ethanol subsidies will be planted more corn this year than in the past six decades. According to the U.S. Department ofAgriculture, corn growers want to 90.5 million hectares in 2007 Appendix. Since forecasts of ethanol production are expected to rise, expect more corn is grown. In 2008, about 25 percent of U.S. corn production plans to produce ethanol. By 2012, 4.3 billion bushels of corn are expected to ethanol production. It takes about 450 pounds of corn to produce 25 gallons of ethanol fuel to power an SUV.

The recent ethanol boom has become a boon to fertilizer companies and theirStock prices. Since last summer, shares in Saskatchewan-based Potash Corp. have more than a record $ 191.46/share doubled. The company is the world's largest potash producer and a major producer of nitrogen fertilizer. Shares in Illinois-based CF Industries, have tripled over the same period. The company manufactures both nitrogen and phosphate fertilizers. Both have benefited from relatively lower natural gas prices in the face of strongDemand for their products.

In 2004, about 12 million tons of nitrogen nutrients were consumed. But the increase in corn plants has begun to bottlenecks in nitrogen fertilizer after Potash CEO William Doyle. He told Bloomberg News last week that some farmers do not receive sufficient fertilizer supplies because transportation facilities are nearly overloaded with shipments. This could affect fertilization remain mid-summer, when the offer to continuetight.

Corn planting is now taking place until May in the Midwestern U.S. Some farmers plant their nitrogen before in March and April and skip the "side dressing" in the summer. Fertilizing is generally done for two to three weeks at corn planting time. Side dressing is done over another two to three weeks in July. "Knee high and the Fourth of July," describes when the second fertilization takes place. This refers to the amount of corn and represents the last fertilizerApplication of the growing season. Side dressing is to give plants a boost and provide a simple, smooth and better harvest.

We talked to Ohio, a farmer who told us: "Even though we farmers are complaining about are the additional costs for fertilizer, we can not afford not provide adequate amounts for corn production." He said: "If 28-percent Nitrogen costs me $ 100 / t, is more, and I use third ton per hectare to an additional fee of $ 33/acre. With a yield of 150Bushels per hectare, the cost is $ 0.22 per bushel. But when corn prices are $ 1.50/bushel higher, then I can not afford, using the nitrogen. "There is a better return in higher corn-producing states such as Iowa and Illinois, where yields are 200 bushels per acre.

The western Ohio farmer also compared his fertilizer costs for this season compared to earlier plantings. "In 2000, my cost was $ 242/ton for NH3," he said. Cost this year has almost doubled to $ 580/ton.For sowing in 2001, he paid $ 165/ton for 28-percent liquid nitrogen. Its costs would have been about $ 280/ton for this season, but he has already paid for this fertilizer in December, but paid about the same, he would in 2004. For every dollar increase or decrease in gas prices, fertilizer prices can swing up or down by 95 cents.

For these farmers fertilizer applications, he prefers 28-percent liquid nitrogen for each of handling andApplication. While anhydrous ammonia can) (NH3 are also used and is cheaper per unit of nitrogen, he found it less safe for use. NH3 is also a favorite among the illegal methamphetamine manufacturers who siphon the ammonia from farmers nursing tanks. Urea is volatile and are used mainly for wheat, but also from the western Corn Belt farmers.

Fertilizer prices more than doubled in the past 15 years, and there is no peace in the short term. A recent EnergyInformation Administration outlook forecasts benchmark natural gas to rise by 9.2 percent in 2007 and a further 3.7 percent increase in 2008. Global demand for fertilizers increased by 13 percent between 2001 and 2005, according to the Fertilizer Institute. After China and India, the U.S. is the world's third largest producer of nitrogen. Next year, the Ohio farmer could be faced with a steeper bill to fertilize his corn and other crops.

Global Nitrogen DemandDrive demand for natural gas

The success story of ethanol in Brazil has spread worldwide. Fortunately for Brazil is ethanol from sugar cane, maize is not produced. The country relies mainly on non-nitrogen-based potash for its fertilizer – possibly as many as 6.5 million tonnes in 2007. But Brazil's productivity of liter per hectare from sugarcane dwarfs corn productivity.

According to the Worldwatch Institute, sugarcane yields about 6,500 liters of ethanol for eachHectare compared to less than 3,000 liters of ethanol for every hectare of maize in the United States produces. The ratio of energy from sugar cane, as compared to the fossil energy input required to produce ethanol is greater than 8-fold. The same ratio is applied to corn from 1.3 to 1.8.

As with any product you have to talk about discussions on China and India. Ethanol production is increasing, but remains far below the percentage shares of the U.S. and Brazil. Fertilizers are seriousBusiness in China, where nearly 50 million tons of fertilizer consumed per year. By 2011, fertilizer production could top 63.5 million tons, according to national regulations in China in agriculture and rural economic development (nared). Of expects China to produce 42 million tons of nitrogen fertilizer.

By 2020, it could as little as 0.2 hectares of agricultural land per person. But China is facing a major problem, while an annualized 7.5 percent GDP growth during this period. How will China obtain sufficient natural gas to achieve this goal?

Earlier this month announced a consultant to the National Commission for Development and Reform Commission (NDRC), "We are seeing difficulties importing gas." China has thwarted in meeting its annual LNG import target of 20 million tonnes by the year 2015 has been . The country has been trying to reduce its dependence on imported oil increased use of natural> Gas.

China's NDRC has targeted natural gas contains up to 8 percent of the country's energy mix in order to simply the pollution load of the coal industry places on China. The country is the world's largest copper consumer and the largest steel producer. For its energy, it draws heavily on coal production – and is now expected to become a net importer of coal for the year 2007.

High gas prices have forced to leave China moreCoal-speed and the emphasis on the country's growing natural gas sector. PetroChina began in March and Royal Dutch Shell PLC Changbei commercial production in the joint venture gas field in northwest China. Other natural gas fields in southwestern China, PetroChina's Longgang gas field, and Sinopec Corp's Pugang gas field in Sichuan province, may both show promise of increasing gas's role in the countryEnergy mix. But the NDRC's plans of 92 billion cubic meters of natural gas by 2010 is expected to reach shortly. At this time, can achieve gas just a bit higher, at 5.3 percent of total energy of the China production.

Which brings us back to manure. China plans to reduce annual grain production capacity by an increase of 0.65 percent within five years – and hopes planted grain acreage by 0.18 percent. The level of planning will be required to forwardto improve yields. Therefore, we expect that an increased confidence in achieving realistic on nitrogen fertilizers, the country the target. Significant percentage increases required in nitrogen fertilizers to overcome the poor soil nutrients in China.

How will China reconcile lowered expectations of natural gas imports in the context of increasing nitrogen fertilizer? We have already covered China's emerging coalbed methane (CBM) sector because (a)Country hopes that the number of coal mining accidents, which can be made up of methane explosions and (b) reduce to increase the country's CBM energy mix.

According to the Carbon Finance Unit of the World Bank, China has placed a great emphasis on coal-bed methane projects. China's National Climate Change Coordination Committee place coal methane projects in the four categories for the prioritization of development projects. Hopes Over a period of 20 years, China to reduce carbon dioxideEquivalent of 40 million tons by capturing the methane gas from coal mines in the country and use the gas to produce clean energy.

Now there's a third reason, the country follow the CBM sector. A large part of China coalbed methane consumption has been allocated for nitrogen fertilizers. The industry is generally associated to methane gas for nitrogen production. As the country increases fertilizer production, the country's state CUCBM(China United coalbed methane) company will take a responsible role in supporting many of the early days CBM projects into production.

This could also explain BP Plc announced to invest heavily at the beginning of this year, planning in the development of the company's CBM fields in the San Juan Basin (Colorado, New Mexico) to achieve. BP plans to spend more than 2 billion U.S. dollars in order to increase methane gas production. Other countries are also looking to meet CBM as another way to the rising demand forNatural gas.

When CUCBM began awarding the production-sharing contracts (PSC) to foreign companies such as Far East Energy, Green Dragon Gas, oil and Fortune Pacific Asia China Energy, the company probably did not anticipate a large proportion of methane production from the coal seam would go for fertilizer production are made. But at this point, this could increasingly be the case.

The world is going forward to produce ethanol for energyNeeds, or to yield his ground a larger harvest, the role of natural gas could increase dramatically. Then the ground for natural gas prices could begin escalating as it has been found in many other commodities. Not only in the United States, but also in many other countries where fertilizer consumption would grow by leaps and bounds.

Copyright © 2007 by Stock interview, Inc. ALL RIGHTS RESERVED.

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December 17th, 2009Natural Gas Prices ArticlesRead More >No Comments


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