Major U.S. fertilizer industry CEOs last week took aim at recent USDA projections that corn yields in the U.S. would hit a record 166 bushels per acre (GM May 14, p. 13) and significantly beef up corn stocks. After the USDA assessment, both corn prices and fertilizer industry stock prices dropped.

Many of the CEOs were given a unique opportunity to vent at the BMO Capital Markets Farm to Market Conference May 15. CVR Partners LP President and CEO Byron Kelley said at most bushels per acre could hit 160 at best, but that 166 was a stretch. He said at 96 million acres you are pulling in the less productive acres. “The acreage is not going to give you the yield of your best farm lands, and I think that USDA failed to put that into their analysis.” He said 166 bushels per acre has not been done. “If you look at the average over the last five years, we produced about 153 bushels per acre. Last year, we produced 147 bushels per acre, the year before that 153, and now we’re going to move to 166 using a lot of unfertile crop lands.”

As for corn prices, he doesn’t believe they will go below $5.00 per bushel.

PotashCorp President and CEO Bill Doyle reminded analysts that even at $4.00-$5.00 corn farmers will receive a very sufficient return. Doyle said he believes there will be an early harvest, and added that the industry is still in the middle of May and weather can still play a major role. He said there are some dry pockets in some growing areas that are going to need very substantial rain in June. “If you look at just two years ago, 2010, USDA forecast 164 bushel yield for the corn crop; it came in at 152, which again, was impacted by weather.”

“And personally,” added Doyle, “I think that USDA has this setup for perfection at the moment, and it’s possible if you have perfect weather, but we know that oftentimes that isn’t the case.”

Agrium Inc. President and CEO Michael Wilson told analysts, “The ag market is great. Don’t be afraid of $5.00 corn.” Wilson said the historic average margin for corn is $3.50, and that is using today’s corn and input pricing. “We think when you start dropping below that $3.50 range, the farmer will start cutting back. It will have some impact. They can mine the soil for P&K, if they choose. So you might see a little bit of that. You won’t see the nitrogen cut off.”

And as a retailer that buys some 8 million mt of fertilizer each year, Wilson said retailers will have to stock for the second half of the year. “Well, you have to restock your shelves in the back half of the year. The farmer wakes up in the morning and phones you and says, bring it over. They don’t phone you a month early; they don’t phone you three weeks early.”

Wilson noted, however, that retailers and farmers were afraid to take product too early this spring. “The reason nitrogen popped up to $700/mt is no one had any inventory. They were all afraid to take it.” He said due to Agrium’s distribution ability, this played to its strength.

“There are varying perspectives on yields and potential corn prices, but corn futures are still over $5.00 a bushel, and that’s the high end of what we have seen as historic levels,” added CF Industries Holdings Inc. CFO and Senior Vice President Dennis Kelleher. “We continue to expect farmers to plant over 90 million acres of corn for the next several years, with that continuing to drive strong demand for crop nutrients.”

SynGest Inc., the California-based company with plans to build a plant near Menlo, Iowa, that will produce fertilizer and energy from corn cobs, claims that a recent decision by the Iowa Economic Development Authority (IEDA) to cancel a $2.5 million grant for the project is simply a misunderstanding.

“The actions being taken in Iowa right now are the direct result of a misguided Associated Press story that has led to a misunderstanding at IEDA,” said SynGest CEO Jack Oswald. “We are confident that with a little bit of time and calmer heads, that we will ultimately get this project back on track.”

Earlier this month IEDA declared SynGest had defaulted on its state contract by failing to note in its application for the grant that SynGest Chairman Serge Randhava had been accused in a federal lawsuit in Illinois of racketeering and fraud related to his role in a previous research project involving fertilizer.

In a letter to SynGest dated May 1 and released to the Associated Press, Director Debbi Durham notified the company that its Iowa power fund grant was being terminated immediately due to failure to report that Randhava was named as a defendant in a federal court suit in Illinois in 2005. The notification stated that part of the basis for this litigation, Gas Technology Institute v. Rehmat, was the allegation that Randhava, in his role as president of Gas Tech LLC, misappropriated approximately $530,000 of funding provided by Gas Research Institute to Gas Tech LLC.

In its financial assistance application, the authority’s letter noted, SynGest answered “no” to questions whether “there any judgments or court actions completed or pending against the applicant entity, or any current or prospective employee, officer, principal, director, or owner and has any current or prospective employee, officer, principal, director or owner been accused or convicted of any crime or wrongdoing?"

Oswald told Green Markets that this situation had nothing to do with his company and was civil litigation that took place in 2005 and had been settled by late summer 2009. “It amounts to a technicality how the application had been checked,” he said. “I didn’t know about it beforehand.”

In support of SynGest, Prof. Robert Brown at the Iowa State University Institute for Physical Research and Technology wrote to IEDA that SynGest and its management team had his continuing support with respect to its grant for the proposed project to develop a bioammonia facility in Iowa.

“I have been part of the SynGest technical advisory council for over two years and continue to be confident in their executive team and the viability of their business plan,” Brown wrote.

Support also came from Nigel McMullan, vice president with Matheson, which expects to be partnering with SynGest. “In addition to investigating the character of those involved,” McMullan wrote, “we have also reviewed your process, technology and business plan and applaud you for choosing technology that appears to be the most viable in the renewable energy industry.” McMullan added that Matheson likely will invest millions to support SynGest projects.

Mike Bontrager, industrial segment president with The Weitz Co., wrote that “we have been quite impressed with the entire company’s strength and ethic of perseverance and are confident that SynGest will weather this unwarranted storm and ultimately thrive.”

Heartland Co-op, headquartered in West Des Moines with some 48 locations throughout central Iowa, announced in 2009 that it had signed a “letter of interest” with Syngest to explore a partnership whereby Heartland would store and market the ammonia produced by the plant, and also collect and transport corn cobs to fuel the facility (GM Sep