Value Microcaps Food, Agriculture and Soft Commodities

[kipp440]

Cellulosic Ethanol To Power Fertilizer Demand
4/16/2008
It sounds all too perfect for grain producers. Not only are grain prices going through the roof but now a
significant end user of crop wastes like corn stover and wheat straw is emerging - the cellulosic ethanol
industry. This offers the additional promise of even more financial windfalls in the game of crop
production for farmers. But there will be major ramifications for the sustainability of grain production
once we commit to remove not only grain but every skeric of plant residue our crops push out of the
soil. There will be a major and significant increase in the amount of fertilizer nutrients farmers annually
mine from the soil substrate.
Potash demand in particular is likely to soar to unprecendented levels as this particular mineral fertilizer
is essential for plant structural integrity. The removal of 1 tonne of wheat or barley straw will see the
potassium equivalent export of 12kg of muriate of potash. If you remove 3 tonnes per hectare of straw
(an average global yield) that is a cumulative potash export of 36kg /ha on top of what is removed in the
grain. Can our global potash resources stand up to such a major ramp up in demand?
The story for nitrogen is somewhat similar. Again if we look at quantifying nutrient removal. 1 tonne of
cereal stubble will contain the nitrogen equivalent from 13kg of urea. So a cumulative removal of
39kg/ha of urea on top of that removed in the grain portion in a 3 tonne yield. Are our global natural gas
resources up to this gearing up of the demand base?
For phosphate there is also bad news as we see additional phosphorus units being lost from the cropping
system. 3 tonne of stubble removed sees the equivalent phosphorus export of around 33kg of
superphosphate.
With these figures in mind, there is the potential for fertilizer prices to soar to levels not ever seen nor
even imagined as this demand base kicks in. Yet again we saw more significant rises in the last week
with DAP surging past the US$700 per tonne mark.
What happens to our soils as they are left exposed to the vagaries of extremes in weather with no
physical defences from erosion? I shudder to think. Soil organic carbon levels will likely plummet as the
practise of straw retention becomes a major short term opportunity cost. The need for perennial based
agricultural systems will become a very important drive if we are to maintain some level of resiliance in
our agricultural production base. The only problem being that apart from pigeon peas in India, there are
no other perennial grain crops that are close to commercial exploitation.
Quite clearly cellulosic ethanol is likely to push agriculture to the brink of its true sustainability limits.
And it is likely to stretch demand for fertilizers to a new level where existing and planned new capacity
may struggle to satisfy the hunger of nutrient cleansed soil profiles from the Pampas of Argentina to the
Prairies of the United States.