Iowa Farmer Today
06-09-07
Growing ethanol industry gives farmers more buyers
By Tim Hoskins, Iowa Farmer Today
SCHLEY -- For years, Dave Sovereign’s only source to sell his corn was the river
market in Eastern Iowa 70 miles away.
The Howard County farmer soon will have four more markets closer to his farm
for his corn. Those four markets are ethanol plants.
They include: Golden Grain Ethanol in Mason City, 63 miles away; VeraSun in
Charles City, 40 miles away, Hawkeye Renewables in Fairbank, 62 miles away;
and soon Absolute Energy in St. Ansgar , 65 miles away.
These ethanol plants are scheduled to produce a total of 480 million gallons of
ethanol per year. That would consume 192 million bushels of corn.
That does not include the production capacity and amount of corn that will be
consumed at an ethanol plant under development near New Hampton.
In 2006, farmers in Cerro Gordo, Mitchell, Floyd, Chickasaw, Buchanan, Fayette
and Howard counties produced a total of 145.5 million bu. of corn, according to
the Iowa Agricultural Statistics Service.
That demand, combined with production, has translated into a changing corn
market for farmers.
Sovereign’s family owns and operates an elevator near here. They have noticed
the growing number of ethanol plants has changed corn marketing.
The increased number of markets within a close range generally means an
improvement in the basis paid in cash prices.
“It has affected the basis in a positive manner,” Sovereign says.
Charlie Hurburgh, professor in charge of the Iowa Quality Grain Initiative at
Iowa State University, also has noticed the shift in markets.
For example, he says the Mississippi River markets in Eastern Iowa have
historically had the narrowest basis. However, one time this past year, the Fort
Dodge market had a higher bid for corn than the river markets, he says.
As markets or processors have a need, they increase the price paid for corn.
“In places, we are running out of corn supply,” he says.
Hurburgh says the ethanol effect is starting to ripple through the export markets.
Historically, Iowa produced more corn than it used and sold the excess on the
global market.
The growth of ethanol plants might mean Iowa farmers will not have corn to sell
outside the state. Another effect is there will be more of a year-round market for
corn.
In the past, Sovereign says they would bid for corn when the Mississippi River
was open for shipment, generally from March to November.
He says the year-round marketing cycle helps farmers as well.
“It allows farmers to better manage their time,” he explains.
Instead of trying to market corn before the river would close for the season,
farmers can spend that time finishing harvest, then store the corn to be sold later.
However, that does not mean the river markets should be ignored because
ethanol plants can consume only a set amount of grain.
Hurburgh says it might be tough to import corn into Iowa because:
# Other corn-growing states, such as Illinois and Indiana, are also building
ethanol plants that will consume the corn produced there;
# not many ethanol plants in Iowa are designed to take rail shipments of corn;
and
# the U.S. rail system is mostly designed to move commodities east and south
not west and north.
The bottom line is “we are going to grow the corn here,” he says.
To take advantage of the biofuels boom, Hurburgh says farmers need the ability
to truck their grain to markets.
“Semis are necessary for the biofuel economy,” he notes, because many ethanol
plants are roughly 30-40 miles apart.