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Politics : Rat's Nest - Chronicles of Collapse -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (2711)	10/19/2005 11:03:12 AM
From: Wharf Rat	Read Replies (1) \| Respond to of 24227

Natural gas prices take toll on U.S. agriculture Tue Oct 18, 2005 4:02 PM ET By Lisa Haarlander CHICAGO, Oct 18 (Reuters) - High natural gas prices are shaping farming decisions across America's heartland, from what farmers will plant in the spring to how corn and soybeans processing plants operate, grain dealers and brokers said. With tight margins and fierce competition, the high costs have not yet been passed on to consumers and are instead eating into profit margins, the sources said. "There's that constant fear of raising their rates to recoup those costs because they are so competitive," said Jeff Adkisson, executive vice president of the Grain and Feed Association of Illinois. "The first guy who raises his rates won't have grain to merchandise." Elevators use large amounts of natural gas in the fall to dry freshly harvested grain so it can be stored. Charging high fees for drying could cause farmers to take their crops to another elevator -- and deprive the elevator of revenue from storing and reselling the grain. Spot prices for natural gas have more than doubled in the last year, rising to $11.92 per million British thermal units from $5.85 in the Chicago market. Natural gas futures on the New York Mercantile Exchange were nearly double year-ago levels at $13.33. But elevators in western Iowa have raised drying charges less than 10 percent from last year. "If you don't have an efficient, modern dryer, at current commercial rates you're losing money," said Roger Fray, vice president of grain at West Central Cooperative in Ralston, Iowa. Many corn and soybean processing plants were built to run on natural gas because at the time it was cheaper than coal or oil. Corn Products International Inc. (CPO.N: Quote, Profile, Research), one of the world's largest corn refiners, saw third-quarter profits fall 3 percent from a year ago, partly due to high natural gas prices. PLANTING LESS CORN Some farmers, looking at higher natural gas prices, are deciding to plant less corn and switch to soybeans or wheat because they require less nitrogen fertilizer, which is produced using natural gas as a feedstock. The cost of nitrogen fertilizer has doubled to $500 per ton from $250 two years ago. Natural gas is combined with nitrogen from the air to make ammonia, the base for nitrogen fertilizers. So far, businesses are making small adjustments rather than major overhauls while they keep their eye on energy prices. "Are these increases temporary or permanent?" said Adkisson of the Grain and Feed Association of Illinois. "If they're permanent, you've got to make permanent changes. If they're temporary, then those companies that can trim costs and merchandise effectively will weather this." today.reuters.com