Politics will fuel U.S. ethanol plants: Agrium CFO

WINNIPEG, Manitoba, May 14 (Reuters) - The political clout of U.S. farmers means ethanol production is unlikely to decline from current levels despite growing concern about using corn to make biofuel, a top executive of Agrium Inc (AGU.TO: Quote, Profile, Research) said on Wednesday.

Strong support for the ethanol industry from U.S. farm states combined with soaring oil prices will trump calls for the U.S. government to cut back on its biofuels mandate, said Bruce Waterman, chief financial officer of Agrium, the largest U.S. retailer of fertilizer, seed and chemicals.

"In the U.S., we're not particularly concerned about the existing ethanol plants failing to continue to produce," Waterman told a conference in Saskatoon, Saskatchewan.

"We just don't think particularly in an election year ... that any U.S. politician is going to propose to wipe out 5 percent of the U.S. gasoline supply," Waterman said.

"How fast it grows in the future, I guess that could be questioned, but the existing ethanol production, in our view, will continue," he said.

Rising food prices and shortages in some parts of the world have led to calls for the United States to cut back on ethanol production, which absorbs about a third of its corn crop.

Sen. John McCain, the Republican presidential candidate, and other U.S. politicians have said they would like to see ethanol growth curbed.

But Waterman said only 3 percent of world crops this year went into biofuels, when the livestock feed value of biofuel byproducts is taken into consideration.

Grain and food prices are rising because of demand for meat from grain-eating livestock from the growing Asian middle class, he said.

"In our view, ethanol is sort of more like icing on the cake, and maybe there's 50 or 75 cents (per bushel) in the corn price because of ethanol," Waterman said.

Spot corn futures prices Cc1 climbed more than 70 percent during the past year to hit a record high of $6.27 per bushel last week.

Record grain prices have motivated farmers to boost yields with fertilizer, driving up prices and the stock of producers like Calgary, Alberta-based Agrium, the world's third largest nitrogen manufacturer.

Grain prices will likely stay high for three to five years until the world rebuilds depleted stocks, said Wayne Brownlee, chief financial officer of Potash Corp of Saskatchewan (POT.TO: Quote, Profile, Research), the world's largest fertilizer producer.