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Nearby Potholes May Flatten Ethanol-Fueled
Economy
"The ethanol industry will be traveling a bumpy road
in 2008," says Wally Tyner, a Purdue University agricultural economist.
He points to high input costs for corn -- with nearby corn futures
currently approaching $6/bu. -- and almost a doubling in the industry's
production capacity this year as two main reasons for concern.
"The ethanol industry started the year in January with a
7-billion-gallon capacity, but by July that capacity will grow to 12
billion gallons, and by December capacity will be 13 billion gallons,"
he says. "That means there will be a whole lot more ethanol on the
market later this year than we can absorb with the current
infrastructure."
Long term, the U.S. has the potential to absorb all the added ethanol
production capacity, adds Tyner, "but near term (in 2008), there will be
pressure on lower-efficiency plants to stay profitable."
Crude oil prices will have to stay high for the less-efficient ethanol
plants to stay in business, he emphasizes. "What really matters [for
ethanol's continued success] is gasoline prices," says Tyner.
Corn growers can thank the Organization of the Petroleum Exporting
Countries (OPEC) for help to escalate gasoline prices last week when it
agreed to reject increases in crude oil production. As a result, several
futures analysts made predictions that crude oil prices could increase
to $120/barrel by this summer.
Such a possibility for crude oil is both believable and a potential
boost for the ethanol industry, says Chad Hart, an Iowa State University
agricultural economist. "Looking into this summer, the nearby crude oil
futures price recently settled at $104.50/barrel," he says. "So, we're
only $16/barrel away from the $120 price, and we're just now entering
the peak season for gasoline use in the U.S."
High energy prices definitely give ethanol room to breathe,
especially given the high price for corn right now, adds Hart. "High
crude oil prices mean higher gasoline prices," he says. "Higher gasoline
prices allow ethanol to remain at a comparative discount and to possibly
find its way into new markets. For example, there are places in the
southeastern U.S. that are now looking at ethanol as a cheaper fuel
source than gasoline."
On the other hand, crude oil futures show that prices now peak at the
nearby markets and slowly diminish further out, points out Hart. "If we
look at April 2009 crude oil futures, the price drops below $100/barrel
again," he says. "After that, the futures market shows crude oil
stabilizing at about $100/barrel for awhile."
In comparison, corn futures markets show that the current battle for
row-crop acres will likely continue for the next couple years, keeping
pressure on ethanol profit margins. "As corn prices rise, the ethanol
industry has a much harder time staying profitable," says Hart. "Right
now, the futures markets show a long-term struggle for corn acres, but
especially for the 2008 crop year."
Recently, corn prices have been moving up much more quickly than the
crude oil and ethanol prices have been, he adds. "As a result, we're
seeing a squeeze in ethanol's profit margins," says Hart. "We're
definitely stretching the economic capabilities of these plants to move
forward, although it depends a lot on each plant's individual cost
structure."
Older ethanol plants that have already paid off their fixed costs are in
much better financial shape than the newer plants that still have debt
from construction costs, he points out. "Looking at the industry's
average cost of production, we're still seeing positive margins right
now for ethanol," says Hart. "However, with the margins as thin as they
currently are, the ethanol coproducts are creating whatever profit
margins that we are seeing to date. So, if you include the value of the
distiller's grains, the average ethanol plant can at least cover their
cost of production."
Yet, with more ethanol plants coming online this year, ethanol prices
will likely head lower, notes Hart. For now though, higher crude oil
prices are helping ethanol prices increase. Two weeks ago, nearby
ethanol futures were selling for about $2.20/gal., he points out. Last
week, with crude oil prices higher, ethanol futures settled higher,
between $2.35 and $2.38/gal.
For more information on ethanol plants and their impact on local
economies, click here: www.extension.iastate.edu/news/2008/feb/122901.htm.
By John Pocock
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20% Ethanol
Blends Unlikely In 2008
Corn growers are currently advocating changing the law
to increase the percent of ethanol used to blend with gasoline to meet
environmental standards from 10% to 20% ethanol. However, a change in
the current law is unlikely to occur any time soon, says Wally Tyner, a
Purdue University agricultural economist.
"The auto industry would have to honor warranties for the higher blends,
and that's not likely to happen quickly," says Tyner. "If the cry is
loud enough, that might still happen in 2008, but I don't think it will.
The auto industry will want to avoid exposing themselves to lawsuits and
the EPA will also have to certify that there are no environmental
problems associated with the higher ethanol blend."
Some ethanol plants will likely struggle to remain solvent when the
ethanol production jumps dramatically this year as new plants come
online, predicts Tyner. The main near-term solution to the added ethanol
supply is to increase the ethanol blending percentage to 15% or 20%, he
says. However, he adds that blends as high as 85% ethanol offer a more
long-term solution to the potential ethanol glut ahead.
For more information on Tyner's outlook on government policies and their
impact on energy and agricultural markets, click here: www.agecon.purdue.edu/papers/.
By John Pocock
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E20 Blend Passes Compatibility, Performance
Tests
Increasing the amount of renewable ethanol blended
into gasoline from 10% to 20% does not present problems for current
vehicles or fuel dispensing equipment and provides similar power and
performance, according to a new study released last Wednesday by the
state of Minnesota.
Using 40 pairs of vehicles commonly found on American roads, a year-long
research effort found that increasing ethanol blends from 10% (E10) to
20% (E20) in a gallon of gasoline provided an effective fuel across a
range of tests focusing on drivability and materials compatibility.
“Using homegrown, renewable fuel is an important part of Americanizing
our energy future and unhooking our country from foreign sources of
oil,” says Minnesota Governor Tim Pawlenty. “This study shows that
we can safely increase the amount of ethanol blended with gasoline for
use in today’s vehicles. We’re proud that Minnesota is helping lead
the nation to a cleaner, more secure energy future and we’re hopeful
that other states will continue to join with us in this effort.”
The state of Minnesota conducted the study as part of the process to
meet a state law that requires ethanol comprise 20% of all gasoline sold
in the state beginning in 2013. Governor Pawlenty signed legislation
that included this requirement in 2005. Minnesota and its partners will
soon apply to the EPA for a waiver to federal rules that will allow E20
to be used in all of the state’s gasoline.
To continue reading this press release about increasing ethanol blends
from E10 to E20 in Minnesota, click here: www.mda.state.mn.us/news/releases/2008/nr-2008-03-05-e20.htm.
To view an electronic copy of the full preliminary report, click here:
www.mda.state.mn.us/renewable/ethanol/default.htm.
Source: Minnesota Department of
Agriculture/Minnesota Pollution Control Agency
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Ethanol Industry Under
Fire
The ethanol industry has been taking some pretty
severe hits lately from the popular news media, some university studies,
environmental organizations, food processors, livestock organizations
and some political leaders. Some have blamed the rapidly expanding
ethanol industry for increased food cost, much higher livestock feed
cost, short-term grain shortages, excessive water usage and potential
pollution hazards.
To read more about ethanol and its benefits to the nation, despite its
recent public relations challenges, click here: cornandsoybeandigest.com/biofuels/news/0305-ethanol-industry-under-fire/.
By Kent Thiesse
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Final Corn Values Announced For Crop
Insurance Premiums
The Risk Management Agency has released all parameters
required to calculate 2008 crop insurance premiums for corn and
soybeans. The final versions of the 2008 iFarmCrop Insurance Tools have
been updated with the following values for areas with sales closing
dates of March 15, 2008.
Final Values for Corn are:
APH indemnity price = $4.75
CRC base price = $5.40
RA base price = $5.40
GRIP base price = $5.40
CRC price factors = $0.969
RA price volatility = $0.30
GRIP price volatility = $0.28
Final Values for Soybeans are:
APH indemnity price = $11.50
CRC base price = $13.36
RA base price = $13.36
GRIP base price = $13.36
CRC price factors = $2.763
RA price volatility = $0.31
GRIP price volatility = $0.31
All final versions of the 2008 iFarm Crop Insurance Tools are available
at:
www.farmdoc.uiuc.edu/cropins/index.asp.
Source: University of Illinois
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La Niña
Likely To Last Though Fall
The National Weather Service’s Climate Prediction
Center (CPC) issued its latest outlook on La Niña last week, with
“approximately one-half [of the forecasting models] indicating that La
Niña could continue into the Northern Hemisphere fall.”
The significance in the CPC report isn’t so much that half the models
show La Niña continuing into the fall, but that “an increasing number
of these weather models are trending toward a longer-lasting La
Niña,” says Drew Lerner, World Weather Inc., meteorologist and owner.
“For the last several months, only a few models have suggested that La
Niña would last into summer, and now that number is up to about eight
or nine out of about 17 different models that suggest the event might
last into autumn.”
A traditional La Niña that lasts into summer and fall typically brings
“a bias for dryness and higher temperatures that can be a threat to
crop production in a portion of the U.S. corn-growing region,” points
out Lerner. “However, the current La Niña has not fully behaved like
a traditional La Niña, and the results may be different this year than
in other La Niña years.”
Also, newer corn hybrids have shown they can handle drier conditions
better than they could in the 1980s, the last time a strong La Niña
weather pattern prevailed in summer and fall, points out Lerner “The
past three dry years in a row prove that these newer hybrids can do just
fine in a drier-than-normal summer,” he says. “So, even though this
La Niña brings with it a bias for drier, hotter weather for some parts
of the Corn Belt this year, it’s still difficult to predict how much
it might affect yields, if at all, for any portion of the Corn Belt.”
For more information on the latest La Niña outlook, click here:
www.cpc.ncep.noaa.gov/products.html.
For more information on World Weather, Inc., click here: www.worldweather.cc/.
By John Pocock
|
Agricultural Outlook: Grain Prices High, Net Farm
Income Strong
Grain prices increased dramatically in the last two
years and are expected to remain well above pre-2006 levels, report
economists with the Food and Agricultural Policy Research Institute
(FAPRI).
Higher prices increase revenues for crop producers but also increase
feed costs for livestock producers. Overall, net farm income goes up,
some government farm program payments drop and consumers see higher food
costs.
Those current and future farm changes are in a 68-page 2008 FAPRI
Baseline Briefing Book delivered to the U.S. Congress and USDA last week
by the agricultural economists from a multi-university think tank.
The independent analysis, which projects the agricultural economy for 10
years, is requested annually by Congress.
“Agricultural market outlooks appear more uncertain than in past
years,” says Pat Westhoff, co-director of MU FAPRI, Columbia, MO.
“Petroleum prices and biofuel policies drive most of the changes.”
To continue reading this article about the outlook for grain prices and
farmer incomes in the months and years ahead, click here: cornandsoybeandigest.com/ag-issues.
To read the full report that FAPRI delivered to Congress, click here: www.fapri.missouri.edu.
Source: FAPRI
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Avoid
Continuous Traits In Continuous Corn
Growers planting transgenic corn-on-corn should rotate
traits to avoid yield penalties of up to 20% from volunteer corn.
That’s according to Bruce Battles, agronomy marketing manager with
Syngenta Seeds, Inc., speaking recently at the 2008 Commodity Classic in
Nashville, TN. His remarks were part of a learning center session on
protecting yield potential in continuous corn.
“Transgenic hybrids give you an option – other than cultivation –
for controlling volunteer corn in continuous cropping systems, but
that’s only if you rotate your herbicide-tolerant traits,” said
Battles. “If you’re planting glyphosate-tolerant corn after
glyphosate-tolerant corn, for example, you’re eliminating any
postemergence spray option.” The same goes for planting LibertyLink
corn after LibertyLink corn.
To continue reading this article about the benefit from rotating
herbicide-tolerant traits, click here: blog.cornandsoybeandigest.com.
Source: Syngenta
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Soil
Insecticides Boost CRW Hybrid Yields 12 Bu./Acre
Treating corn rootworm hybrids with soil insecticides
boosted yields an average of 12 bu./acre in university trials across the
Corn Belt in 2007.
The 17 yield comparisons, which were conducted by university researchers
at the University of Illinois, Purdue University, Ohio State University,
the University of Nebraska and the University of Wisconsin, compared
YieldGard and Herculex trait corn alone and in combination with various
soil insecticides. Insecticides included Counter 15G, Fortress 5G, Aztec
4.67G and Force 3G applied with the SmartBox closed handling and
application system.
“Based on these results, most farmers would realize a very positive
return on investment,” says Paul Vaculin, marketing manager for
granular insecticides and closed delivery systems at AMVAC Chemical
Corp., which sponsored the trials. “In this high-value market, it can
be a sound business practice to make an extra investment to maximize
yields,” he adds.
To continue reading this article about the potential to increase
transgenic corn yields with SmartBox technology, click here: blog.cornandsoybeandigest.com.
Source: AMVAC Chemical Corp.
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Bioenergy
Mandates Sustain Historically High Commodity Prices
Continuing high crude-oil prices and new bioenergy
mandates, such as the U.S. Energy Independence and Security Act of 2007,
are expected to sustain prices at historic highs across all agricultural
commodities over the next decade. This is according to analysts with the
Food and Agricultural Policy Research Institute (FAPRI) who briefed
Congress last week on their new 10-year projections for U.S. and
international commodity markets.
Global net trade in ethanol is projected to increase by 2.53 billion
gallons, reaching 3.61 billion gallons by 2017. New biodiesel mandates
in the Americas and Europe almost double the price of biodiesel, pushing
it to $6/gal. with the doubling of net trade over the next decade. In
the projection for ethanol, FAPRI expects the world ethanol price to
fall over the first half of the decade because of strong supplies
encouraged by previous price increases. Thereafter, growing demand
strengthens the price again through 2017, and it ends at a projected
$1.52/gal.
Although recent market turbulence and high crude-oil prices have clouded
prospects, the 10-year outlook for the global economy continues to be
strong, with a 3.3% average annual rate of real growth in gross domestic
product. Downside risk in the outlook is seen in the U.S. economy where
rising energy and food prices, coupled with recent difficulties in the
financial and real estate markets, restrict growth in 2008 to only 1.9%.
These problems affect economies in the rest of the world, especially in
Western Europe and Latin America.
The brightest spot in the outlook is the exceptionally solid growth
expected in Asian economies. The decade’s highest growth rates
(7.4-8.2%) are projected for China, Vietnam and India. The outlook shows
the U.S. dollar depreciating (inflation adjusted) against the currencies
of most countries that consume or compete in international export
markets, with the exception of the Brazilian real.
The world corn price increased dramatically in 2007-2008, to
$198.17/metric ton, because of demand from ethanol and livestock sectors
and sustained exports. FAPRI expects that demand will sustain this high
price level over the rest of the decade. Similarly, all vegetable oil
prices soared in 2007-2008 with new biodiesel mandates, and they will
continue to increase by 1.28-3.60% annually for the rest of the period.
To continue reading more of this news release about the outlook for
bioenergy and commodity prices, click here: www.public.iastate.edu.
Source: Iowa State University
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Business As Usual: Farm Bill Falls Short
While Congress continues to debate the nation’s farm
bill, the verdict is already in from corn growers who plainly state a
farm bill without an optional revenue-based safety net is little better
than no bill at all.
“The business dynamic of agriculture today is completely different
than even a few years ago, so ag policy legislation should lead the way
to make this a positive transition,” says Art Bunting, Illinois Corn
Growers Association president. “Much of the farm bill as drafted puts
window dressing on an outdated approach that serves neither corn growers
nor the public well.”
To continue reading this article about what Illinois corn growers want
in a new farm bill, click here: www.ilcorn.org/news/html/2-08-08.html.
Source: Illinois Corn Growers
Association
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Planting Corn
With Perfection
A Thompson sub-machine gun fires 18 bullets a second.
That's the same speed most corn growers sock kernels into the ground
every spring.
“Today's planters are shooting seeds into the furrow at the rate of
16-19 kernels a second,” says Kevin Kimberley. The former corn grower
from Maxwell, IA, uses his farming and equipment experience to consult
with growers across the country, especially in the Midwest.
“If anything in that row unit is off by just a fraction, it leads to
skips, doubles and triples,” he says. “That costs farmers big money
in poor germination, uneven stands and yield losses.”
Kimberley says keeping the planter's row units in excellent condition
can cut yield losses by 5-30 bu./acre. At today's corn prices, that's
$20-120/acre more profit.
To continue reading this article about how to perfect corn planting
practices, click here: cornandsoybeandigest.com/equipment/planting-perfection-0215/.
By Denny Eilers
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Researchers Determine On-Farm Costs To
Produce Switchgrass For Ethanol
The on-farm cost of producing switchgrass for
cellulosic ethanol averages about $60/ton, according to a new study by a
University of Nebraska-Lincoln (UNL) agricultural economist and others.
The study, which contracted 10 farmers in Nebraska, North Dakota and
South Dakota to commercially grow switchgrass for five years starting in
2000 and 2001, gives a real-life look to farmers interested in growing
and contracting switchgrass, says Richard Perrin, the UNL agricultural
economist who was the primary economic analyst for this study. “This
is the most comprehensive study to date on assessing the economic costs
of producing switchgrass biomass in commercial fields,” he says.
The joint U.S. Department of Agriculture-Agricultural Research Service
and Institute of Agriculture and Natural Resources study will be
published in this month's BioEnergy Research. It is available online at
dx.doi.org/10.1007/s12155-008-9005-y.
In the study, two farmers with previous experience growing switchgrass
had the lowest production costs of $39/ton. The five farmers with the
lowest costs had production costs of less than $50/ton, which should be
achievable by other farmers as they gain production experience, says
Perrin.
To continue reading this article about the cost to produce switchgrass
for ethanol, click here: ianrnews.unl.edu/static/0803060.shtml.
Source: University of Nebraska-Lincoln
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Perfect
Planting Tips: A Note From The Corn E-Digest
Editor
In the last couple issues of the Corn E-Digest,
I’ve included articles about the importance of ensuring corn emerges
evenly immediately after planting. One vital component to even emergence
is your planter, planter attachments and planter settings in addition to
soil conditions.
If you have a story about how you have overcome problems with uneven
emergence that you’re willing to share with other readers, I’d like
to hear from you. Just let me know who you are, where you farm, what
caused the problem and how you fixed it. Also, please let me know if I
have permission to use what you write in an upcoming issue of the
Corn E-Digest.
As always, please write to me, (John Pocock) at: jpocock@csdigest.com, if you have
comments or suggestions about topics related to corn production or if
you have concerns or questions about this issue.
Thanks for your readership!
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