Posted By Cindy March 31, 2008
USDA’s highly anticipated prospective plantings report is predicting that farmers will plant eight percent less corn and 18 percent more soybeans. Growers intend to plant 86.0 million acres of corn and 74.8 million acres of soybeans in 2008.
Expected acreage is down from last year in most states as favorable prices for other crops, high input costs for corn, and crop rotation considerations are motivating some farmers to plant fewer acres to corn.
Despite the decrease, the report says, “corn acreage is expected to remain at historically high levels as the corn price outlook remains strong due in part to the continued expansion in ethanol production.”
For soybeans, according to the report, acreage increases are expected in every state, except in West Virginia, which is unchanged from last year.
The largest increases are expected in Iowa and Nebraska, up 1.25 million acres and 1.20 million acres from 2007, respectively. Increases of at least 800,000 acres are also expected in Indiana, Minnesota, and South Dakota. If realized, the planted acreage in Kansas, New York, and Pennsylvania will be the largest on record.
Posted By Cindy March 28, 2008
That’s the multi-million dollar question on the minds of lots of people right now – one that will be answered to some extent by the USDA’s first educated guess on Monday morning when the prospective plantings report is released.
Business Week did an article today about those who are eagerly anticipating the report – from livestock producers to the ethanol industry to market analysts.
Here are a couple of quotes from the article:
“Everybody is looking to see what that report is going to look like,” said Bob Dinneen, a spokesman for the Renewable Fuels Association. “Everybody is anxious, us included.”
Mindy Williamson, a spokeswoman for the Iowa Corn Growers Association, said the ethanol-fueled demand for corn has changed the dynamics.
“Before we weren’t in a demand-driven market,” she said. “Now, it’s all about demand and you have a choice about where we want to sell (corn) and who you want to sell it to. There are still other things beyond farmers’ control, like weather, but it’s a good time.”
Posted By Ken March 28, 2008
Over at the NCGA Web site, there is an article by CEO Rick Tolman about what the economy would be like without ethanol. One study cited therein mentions that gasoline would cost 5 to 10 cents more at the pump. So, one could extrapolate, ethanol saves consumers between $7 billion and $14 billion a year in gasoline costs.
Another authority has now come out with a higher figure. Francisco Blanch, who directs commodities research and strategy at Merrill Lynch, was cited this past week in the Wall Street Journal with research that “oil and gasoline prices would be about 15 percent higher if biofuel producers weren’t increasing their output.”
Time again to pull out the old slipstick and do some math.
The U.S. Department of Energy estimates the United States will use 9.32 million barrels of motor gasoline per day in 2008. This equates to 142.9 billion gallons for the year. If the average estimated pump price is $3.21 per gallon in 2008 (according to the DOE), then a 15 percent savings is $0.48 per gallon. Comparing this over the entire U.S. gasoline usage for a year equals a national savings of $68.59 billion.
There ought to be a rule that whoever wrongly puts all the blame for higher food prices on ethanol must also credit the industry for reducing the cost of gasoline.
Posted By Cindy March 27, 2008
Every day I look for something other than ethanol to write about on this blog, but when it continues to come under attack – and corn growers with it – you just can’t ignore it.
One of the most recent came last week in the St. Louis Post-Dispatch, hometown newspaper of the National Corn Growers Association, which printed a commentary by noted ethanol-basher David Pimentel. The Cornell University professor of entomology rehashed most of his common arguments about ethanol – not really anything new there. (I didn’t know he was an entomology professor – wonder how a bug guy got to be an ethanol expert?)
What was apparently new, and picked up on by NRDC policy analyst and blogger Nathanael Greene, was that Pimentel says corn ethanol actually does have a positive return of fossil fuel investment. Quoting from the article:
Cornell University’s up-to-date analysis of the 14 energy inputs that go into corn production, plus the nine energy inputs invested in ethanol fermentation and distillation, confirms that more than 40 percent of the energy contained in one gallon of corn ethanol is expended to produce it.
Greene notes that means the return on fossil fuel investment is about 2.5 (100%/40%).
Thanks to the Iowa Corn Growers for sending out a press release alerting media to this.
“The naysayers’ wall of misinformation is beginning to crumble,” says Tim Burrack, a corn grower leader from Arlington, Iowa. “Corn growers have been touting the benefits of ethanol for more than 30 years and we pride ourselves on using sound scientific data to support our product.”
Note that there does not seem to be a way to comment on Pimentel’s article in the Post-Dispatch, short of sending a letter to the editor (which I would strongly encourage), but you can comment on Greene’s blog post and I would highly recommend that. He nicely refutes Pimentel’s article and another anti-ethanol piece by Tom Philpott in Grist. He deserves congrats for that.
Posted By Cindy March 26, 2008
The chief executive officer of the world’s largest food and drink company has given new meaning to the word hyperbole.
Peter Brabeck-Letmathe, CEO of Swiss food giant Nestle, is quoted in various news reports saying, “If as predicted we look to use biofuels to satisfy 20 percent of the growing demand for oil products, there will be nothing left to eat.”
He also called planned subsidies for biofuels “irresponsible and immoral” and “political insanity.”
I do like the last sentence in the story on Forbes website from Thompson Financial News.
Thus far Nestle has been successful in passing on a strong hike in raw materials prices, including milk, cacao and corn, to its clients.
Posted By Cindy March 25, 2008
Wanted: 270,000 acres worth of corn cobs and kernel hulls to produce 30 million gallons of ethanol.
POET held a meeting last week to encourage area farmers, agribusiness representatives and others to supply them with the raw materials for the Project Liberty cellulosic project in Emmetsburg.
According to an article in the Emmetsburg News, Jim Sturdevant, Director of Project Liberty, told the group of 400 who attended the meeting, “Corn is the foundation for cellulosic ethanol and will be the building block that America’s energy independence will be built upon. That is why we are engaging in Project Liberty.”
“What are you going to pay for cobs” is the most asked question,” Sturdevant said. “Right now, it will be in the $30 to $60 a ton range, with the producers piling the cobs in their field. A third party will handle the collection and transport to the plant.”
Grower Darren Ihnen, of Hurley, SD, explained how the cob harvesting experiments went on his 5,000 acre farm last fall.
Ihnen began his corn harvest Sept. 18, and finished on Nov. 22. Starting moisture on the corn was 28 percent, with the cobs testing 55 percent, but at the end of the harvest, corn tested at 14 percent moisture and cobs tested at 13 percent.The cob harvest was completed with two methods, the corn and cob mixture, using a John Deer combine, and a Cob Caddy, coupled to a CaseIH combine.
Posted By Ken March 24, 2008
Earlier, we provided a dissection of a column by Walter Williams. Another view on the matter is provided here, by Professor Bruce Dale of Michigan State University:
Mr. William’s piece is so full of mistakes that I will probably run out of space before I correct them all. First, all water is removed from ethanol before it is shipped. All cars sold in the U.S. for the last 20 plus years have been able to run just fine on 10% ethanol/90% gasoline. We are now producing hundreds of thousands of “flex-fuel” vehicles per year that can use either gasoline or mixtures of ethanol and gasoline up to 85% ethanol. With some management, ethanol can be shipped in existing pipelines. Very little U.S. corn (about 10%) is fed directly to people; most of it is fed to animals. About one third of the corn converted to ethanol remains behind as a high protein animal feed called distillers grains. Coal and natural gas energy equal to about 70% of the energy in ethanol is required to produce corn ethanol. For cellulosic ethanol (ethanol made from grasses, wood chips, crop wastes, etc.) no net coal or natural gas energy will be required to produce the ethanol. The ethanol blenders credit of $0.51 per gallon cost taxpayers about $3 billion last year, but it reduced crop price supports by about $6 billion and our oil import bill by another $15 billion. It is virtually certain that some of that $15 billion for oil would have gotten into the hands of those who hate America and her people.
As an economist, Mr. Williams ought to know that many factors contribute to rising grain prices: rising wealth and demand in China and India, drought in Australia, and increased ethanol demand all play a role. But that $3 box of corn flakes on our shelves contains about 5 cents worth of corn. Even if corn prices double, the price of grain has a small impact on food prices. Rising energy prices have a much greater impact. Eighty percent of the poorest people in the world are farmers or live in rural areas. Increased grain prices benefit these very poor people and give them more wealth with which to solve their problems. The African farmer especially needs the increased income and agricultural productivity that come with rising grain prices.
Mr. Williams does not like government intervention in markets. I happen to agree with him. Our greatest current market intervention is probably the $50 billion per year (minimum) in military expenditures to keep oil flowing from the Mideast. But we surely aren’t getting cheaper oil in return. Ethanol from corn and later the cellulosic ethanol that will come in much larger volumes will help end our oil addiction, give us cheaper and cleaner fuels and will also promote freer and more stable energy markets.
Posted By Cindy March 24, 2008
Talk about your food price inflation – this past week a single corn flake sold for $1350. I am not making this up – the Associated Press reported it, so it must be true.
Now, no one has yet blamed this on ethanol, but the flake was shaped like the state of Illinois, so it is possible that could be the underlying cause. The average retail price for an entire box of corn flakes is only about $3.29 for 18 ounces – with the price of the corn in those flakes less than a nickel. No telling how this will impact the entire cereal market at this point. We could end up mortgaging our homes for a single bowl of flakes for breakfast!
The investor who drove up the price of cereal in this case is Monty Kerr of Austin, Texas who is owner of a trivia Web site. “We’re starting a collection of pop culture and Americana items,” said Kerr.
The sellers were two sisters from Chicago, Melissa and Emily McIntire, who made a pretty healthy return on their $3 investment. They are planning to take a family vacation on the proceeds from the sale.
While they did make quite a killing in the cereal market, they are discouraging competition. “We’re going to encourage people to eat their cereal instead of saving it,” Melissa says.
Nonetheless, owners of other state-shaped flakes are hoping to cash in on the market. Reports are that corn flakes shaped like Hawaii and Virginia are now up for bid. Wonder if the CBOT is considering a corn flake futures contract?
Posted By Ken March 20, 2008
As someone new to agriculture, I first heard John Phipps at the recent Commodity Classic, and I was impressed by his poise, his intelligence, his humor and his broad knowledge of (and deep affection for) his primary audience.
That said, one of his more recent blog posts really shouldn’t seem all that unusual. As he concludes it:
America works. And works well. And it often starts on our farms.
Posted By Cindy March 20, 2008
The bakery industry is calling on Congress and the Bush administration to “address the wheat crisis” by implementing a three point strategy that includes elimination of the ethanol import tariff and temporary waiving of renewable fuel standard requirements.
The bakers are saying that American farmers are now planting more corn for ethanol production at the expense of wheat acres, a claim which is absolutely false and provable by a simple check of the year-end crop production report from USDA’s National Agricultural Statistics Service.
In fact, wheat production totaled 2.07 billion bushels in 2007, up 14 percent from 2006. Acreage planted was 60 million acres, up 3 million from the previous year, and area harvested at 51 million acres was nine percent more than 2006.
Yet, also in fact, wheat prices have more than tripled and stockpiles are at their lowest point in decades. Why? The two major reasons are the consecutive droughts in Australia, a leading wheat producer and exporter, and growing global demand which has outpaced production for the last several years.
Eliminating the ethanol import tariff will do nothing to make it rain in Australia or lessen the demand for wheat products.