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Producers Eye Bumper Crop and Bouncing Prices
by Bill Zahren

With crop experts predicting the 2008 corn yield will be “the second-largest crop ever,” corn growers would like weather forecasters to make a fall forecast of their own: “unseasonably mild.”

And while we’re at it, some soothing reassurance that harvest markets will be “strong and steady” would be great as well.

The fall tradition of crop prognostication – itself as old as agriculture – revved again on September 12 when the U.S. Department of Agriculture slightly lowered its production estimate for the 2008 corn crop from 12.288 billion bushels to 12.072 billion. The forecast also decreased average yield projections from 155 to 152.3 bushels per acre.

The USDA said it lowered the forecast in all major corn-producing states except Illinois due to in part to some late-season dryness. Even with the slightly lowered forecast, the 2008 harvest is still projected to be second only to the 13.1 billion bushels harvested in 2007.

The USDA report also estimated American farmers have 79.3 million acres in corn this year, unchanged from the August USDA estimation but down 8 percent from the 86.5 million acres planted in record-setting 2007. If realized, the 2008 acreage will be the second-largest area invested in corn since 1944.

To make the harvest dream come true, producer Bob Dickey is hoping for 70-degree days into November and market price trends that don’t resemble an EKG readout.

“We’ve just seen a lot of challenges this year,” said Dickey, president of the National Corn Growers Association who raises cattle, hogs, and 960 acres of corn in northeast Nebraska. “This spring we had cold, wet weather and because of that we didn’t have the number of heat units we normally get in July and August throughout the Corn Belt. I feel we pretty much need an extended growing period throughout the Corn Belt. The frost date is going to be so very critical for our corn crop so I’m hopeful for the killing frost date will be later this year, at least later than average.”

Dickey said he’s bullish that the massive yield will be able to satisfied elevated demands. He points to a September USDA report predicting ending corn supply will exceed demand by 1.62 billion bushels, an increase of 25 percent over the September 2007 ending stocks prediction.

Charlie Staff, executive director of the Distillers Grains Technology Council based in Louisville, Kentucky, also finds no cause for supply concerns based on the USDA crop prediction. In fact, he says the USDA may be significantly under-estimating the impact that distillers grains will have on demand.

“We don’t think that the USDA is considering the fact that some of this corn – we believe up to 20 percent, maybe more – will not be needed because of utilizing distillers grains,” Staff said.

Staff spent the first weekend in October at the World Dairy Expo in Madison, Wisconsin preaching the message of combining less-expensive, protein-rich distillers grains with other products like hay, soy hulls, and grasses to offset corn use.

“Our theme was ‘sell the corn, buy distillers and put money in the bank,’” Staff said. He believes the message has found a receptive audience, estimating that 80 percent of dairy producers use distillers grains in their animal rations.

Staff said right now his concerns trend more toward quality than quantity.

“My biggest concern is we see a lot of corn out there that looks like it might be high moisture, so we’re a little concerned with some micro toxins issues this year,” Staff said. “That can have big impacts with distillers grains. It’s going to require the ethanol plants be looking more at incoming corn to separate out corn that has micro toxin issues to not use that in their processing.”

Staff also said he heard a lot of concerns among producers at World Dairy Expo about the all-over-the-board price of corn.

“There was no perception that there wouldn’t be enough corn,” Staff said. “The biggest concern I heard at World Dairy Expo was the volatility of price. It’s really hard for producers to determine where their break-even price is with the volatility of corn prices.”

In the last week of September, for example, corn prices plunged 16 percent into the $4.50 per bushel neighborhood. Those fluctuations tend to make both producers and consumers of corn queasy. Ethanol producers have watched the price of corn dive right along with the price of crude oil – both of which impact their profitability. With the wild swings lately, no one claims to know where the needle will end up as the crop comes out of the fields.

Dickey agreed there will be a lot of price-per-bushel trepidation this year, even as combines head for the fields. Corn price fluctuations and steadily increasing production costs have farmers constantly harvesting data on the costs fuel, fertilizer, seed corn and more even as they prepare to harvest the massive crop.

For now, Dickey remains optimistic. The crop in the field is huge by virtually any measure, and hopes are high that demand will support profitable prices at harvest time.

“We’re hopeful we can keep the price up there to hold the bottom line that shows a profit. Today it’s imperative the producer know their cost of production and use their risk management tools that they have to protect their bottom line ,” Dickey said. “The rewards are really there, but we also have the challenges of the risk. The rewards that we have today have never been greater, but also the risks have never been greater.”

 
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The American Coalition for Ethanol publishes Ethanol Today magazine each month to cover the biofuels industryís hot topics, including cellulosic ethanol, E85, corn ethanol, food versus fuel, ethanolís carbon footprint, E10, E15, and mid-range ethanol blends.
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