January 23, 2007

Monsanto, Potash shares set records on higher US corn

Increasing corn plantation in the US has kept the shares of seed producers DuPont and Monsanto Co and fertiliser makers Potash Corporation of Saskatchewan Inc and Terra Industries Inc soaring.

Considering the fact that growing demand for US ethanol would keep corn prices near a 10-year high, farmers in the US have been keen on planting corn.

The amount of US farmland used for corn might rise 10 percent this year, the most since 1949, and another 5 percent in 2008, the American Farm Bureau said this month.

The production of ethanol, a fuel additive made from corn rose in the US more than 25 percent last year to 4.9 billion gallons, according to the Renewable Fuels Association, an industry trade group.

The ethanol boom has generated additional demand for corn-related products, said Husic, chief investment officer at Husic Capital, which oversees US$600 million in San Francisco. He owns shares of Monsanto and Potash and added Terra late last year in anticipation of increased US corn acres.

Shares of Monsanto, the GM giant, Syngenta AG, a corn-seed maker in Basel, Switzerland and DuPont, the largest US producer of corn seed, climbed 33, 40 and 27 percent respectively in the last year according to Bloomberg news.

Incidentally, corn is the most fertiliser-intensive crop and has thus boosted sales of nitrogen.

Saskatoon, Saskatchewan-based Potash, the world's largest fertiliser maker also recorded a 77-percent increase. Shares of Terra, based in Iowa have more than doubled. Some other fertiliser makers have also reported similar rise.

Incidentally, corn requires 30 times more nitrogen fertiliser than soybeans, the crop it often displaces, Merrill Lynch & Co analyst Don Carson said. As a result, nitrogen prices have also gone up. Rising ethanol production could keep corn and fertiliser prices higher than normal for several years, Carson said.