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The reason I am posting this here because I know there is some interest
 in fertilizer companies as well as some other ag related companies.

Here is little analysis from someone who is on the front lines of the 
agriculture.  I will be concentrating on corn production in particular 
for two reasons.  The first is because corn is king as it happens to 
have a large base of production already established.  The second also 
lends to first and also why corn will be important going forward and 
that is that corn has the female and and male parts of the plant on two 
distinct areas of the plant. This lends itself much better for plant 
breeders to create inbred and hybrid lines than most other field 
crops.  So in essence corn is much easier for us to manipulate and so 
that is why it has the largest yield increases in the past and will be 
a main crop going forward.

Monsanto made their goal a few years ago to be at national yield 
average of 300 bu/acre by the year 2030. It is lofty goal and I would 
argue that it is out of reach.  I would not only say that the 300 is 
out of reach by 2030, but we may have a tough time hitting 200bu/acre 
in that time frame.

Corn yields at the time were in the low 30s and the average yield for 
1940-44 was 32.22 bu/acre.  Ten years later the average yield for 1950-54
 was 39.44 bu/acre.  That is a 7.22 bushel increase or a 22.41% for the 
ten year period.  

Time        Avg        Inc    %Inc
1940-44    32.22
1950-54     39.44        7.22    22.41%
1960-64    62.52        23.08    58.52%
1970-74    84.14        21.62    34.58%
1980-84    100.18        16.04    19.06%
1990-94    119.58        19.4    19.37%
2000-04    141.38        21.8    18.23%
2007-11    154.65        13.27    9.39%

The yield progression has been fairly close to a 2 bu/acre/year for the 
last 70 years.  At the rate we should be in the 190-200 bu/acre by 
2030.  If in 2030, we have harvest 90 million acres at 200 bu/acre 
would give a 18 billion bushels in production in the U.S.  In 2011 we 
had 83,981,000 acres harvested at 147.2 bu/acre for a total of 12.4 
billion bushels.  2011 was also the poorest year since 2003 when the 
national average was 142.2 bu/acre.

I don’t think there is any way that the supply is going to keep up with 
demand for foreseeable future.  This would imply that the price of corn 
is on a long term price increase and I would hesitate to think how high 
the price could go.  

A few things consider is that the corn based ethanol days are probably 
numbered.  I think we have seen what $6 corn has done to their bottom 
line.  I don’t know the industry could handle $10 bushel corn unless 
there was likewise increase of ethanol or the DDG byproducts.  I just 
don’t think we will have enough feedstock for ethanol and feeding 
livestock.  In the end, the cattle, pigs, and poultry are going to win.

Demand for corn is fairly inelastic as 2% difference in supply can have 
20% swing in price either way(WAG).  Constantly short supply and high 
prices are going to good for any company that is involved in 
agriculture as long as they don’t have to buy corn.  Equipment makers 
like John Deer, biotech seed companies like Monsanto, and possibly 
fertilizer producers like Potash Corp should have cash rich customers 
ready to spend money in order to maximize production.

For the fertilizer producers it is however double edged sword.  Lower 
production also means lower usage as the amount of fertilizer applied 
is tied to how much crop is being removed from the field.  Where this 
can really be a problem, is when the fertilizer supplies are growing 
faster than what the demands are for those crop nutrients.  The 
fertilizer producers are going to have to walk a tight rope in order to 
not significantly outpace demand and not significantly under produce so 
that the high margins(like they are now) attracts new players into 
their market space.

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