Fertilizer companies are booming

With demand for corn rising, these are boom times for fertilizer producers.
SIOUX CITY, Iowa (AP) -- The world needs more corn, and U.S. farmers will do everything they can to meet the demand.
"That's just the nature of the American farmer," said John Scott, who runs a farming operation with his brother near Odebolt in western Iowa. "We will give the market what it wants."
But to produce more corn, needed to feed livestock and the booming ethanol industry, the nation also must create more nitrogen fertilizer. Such fertilizer is used to treat about 96 percent of corn planted in the United States to ensure high yields.
That increased demand has pushed manufacturers to crank out fertilizer at near capacity and has pushed up profits for many companies. Manufacturers have seen their stock prices more than double since last summer.
Charlie Rentschler, an analyst with New York-based Wall Street Access, said improved profits and higher trading prices for fertilizer companies are driven mostly by the immense popularity of planting corn. Higher corn prices raises farmer profitability, which is expected to drive farmers to plant millions of additional acres this spring.
Quotable
"Farmers are going to pile into producing corn this spring," Rentschler said. "The reason why corn prices are up is initially because of ethanol. That's been a tremendous consumer of corn."
Corn is a huge consumer of nitrogen fertilizer.
"Certainly we're very positive about the fact that growers today have a very good income opportunity in grain production," said Michael Bennett, president and CEO of Terra Industries Inc. "Generally our business is more successful when our customers are more successful."
The Sioux City-based company operates six plants and makes anhydrous ammonia, the basic ingredient for most nitrogen fertilizers; urea ammonium nitrate, known as UAN, a liquid fertilizer widely used in North America; and ammonium nitrate and urea, both nitrogen-based fertilizers.
Terra's stock hit all-time highs in recent weeks, up to 18.93 earlier this month on the New York Stock Exchange. Shares were trading at below 6 a share as recently as last June.
Bennett and others who watch agriculture closely anticipate farmers planting as much as 87 million acres of corn this year, a significant increase over the 78 million acres planted last season.
Kathy Mathers, a spokeswoman for The Fertilizer Institute, a Washington-based trade group, said the world demand for fertilizers increased about 13 percent between 2001 and 2005.
The Fertilizer Institute says the United States is the world's third largest nitrogen producer after China and India.
Natural gas
Lower natural gas prices, which make up about 90 percent of the cost of nitrogen fertilizer, also are helping the industry. Those prices soared in the aftermath of Gulf Coast hurricanes in 2005 and remained high into early 2006, causing profits to plummet for many fertilizer manufacturers.
Fertilizer costs have increased significantly for farmers in recent years. Farmers paid 303 per ton for anhydrous ammonia, in April 1996. The price in April 2005 was 416 per ton and jumped to 521 per ton in April 2006.
Scott, the Iowa farmer, said he hopes grain prices stay high enough to maintain farmers' profit levels.
"In the last few years we've been less than profitable. We need a few years where we can get some guys caught up and get on top of things again," Scott said. "The high corn prices are not going to last forever."