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Tension Builds Over Corn Demand

August 18, 2012
By: Jen Russell, AgWeb.com Managing Editor google + 
8 13 12 IN corn
"These ears were all pulled from the same field fairly close to each other," a Jennings County, Ind., farmer tells AgWeb's Crop Comments. "I don't know what to expect for a yield."  

With a short crop on the horizon, end users are scrambling to meet their corn needs. But unfortunately, Jerry Gulke says, a free market isn't always a fair market.


It's no secret—while the drought has had widespread effects throughout the ag industry, the lack of a corn crop this year has hit end users especially hard.

Just last week, USDA lowered its corn production forecast to 10.8 billion bushels, down 17% from last month and 13% from a year ago. The department also slashed its national corn yield estimate to 123.4 bu. per acre, the lowest average yield since 1995/96.

Corn prices have since reached all-time record highs. The combination of high grain prices and steadily deteriorating pasture and rangeland conditions has made it difficult for many livestock producers to keep their operations afloat. Feed has become a No. 1 priority.

Meanwhile, the Renewable Fuels Standard is requiring U.S. fuel companies to blend 13.2 billion gallons of ethanol into gasoline by 2013. According to The Ohio State University Extension, that would require about 40% of the corn crop to be made into fuel.

So what happens when there's not enough corn to go around? "It just means someone is going to do without, or we all do without a little bit," says Jerry Gulke, president of the Gulke Group. He says the lack of corn this year is causing increased competition—and increased tension—between the livestock and ethanol industry.

Upping the stakes even higher is ethanol's current profitability. "Right now, ethanol seems to be profitable," Gulke says, citing higher gasoline prices and a resulting greater public demand for ethanol. "So the ethanol guy is real reluctant to back off right now, as long as he can make money, and that presents a problem for the livestock guy."

Gulke adds that this can cause tension at a very local level.

"We've been watching this for years, to see when push comes to shove, who is going to win when you compete against youselves," Gulke says. "This is not competing against Russia or China buying corn from us; they're not the culprits. It's maybe the guy next to you in church.

"That's the unfortunate thing about a free market. When it works, it's great, but it's not always a fair market."

As a corn producer, Gulke says he's concerned about keeping the demand base intact.

"That's the key question," he says. "What kind of demand base are we going to have left when we harvest next year's crop?"

Listen to Jerry Gulke's full market analysis:

 

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COMMENTS (7 Comments)

CHRIS -
please!!!! Ethanol is profitable!!!1 Then why govt support!!!!!???? Also, FREE MARKET!!!!??? That's laughable!!! We havn't had free markets since the 30s!!! How can Jerry Gulke talk about free markets and ethanol in the same sentance and still keep a straight face!!!! Socialism will ultimatly destroy our industry as well as our freedom. It's coming!!
9:52 AM Aug 22nd
 
results
Re: Montie's request to write your Congressman

While Montie's request is a very important one,
that has the potential to greatly improve our representative governance, his extensive and
possibly well intended comment requires
a critical 180 degree edit, to correct
several (about 11) errors in it's content.
I know that many Congressmen accept information like this, as if it were true.
It should come as no surprise if it sounds like the unfounded rhetoric they're being fed by the fossil
fuel lobbyists and so many so called news media outlets, who parrot (repeat)
their flawed message over and over, again.
What does surprise me is that many who should
know better; don't challenge the accuracy ,
of their flawed message.

I don't have the time to correct all of the points
but to begin, the first point follows, below:
Processing corn into ethanol does NOT require protein, vitamins or minerals that are vital basic components of our food supply.
As a matter of fact,
A vibrant corn ethanol industry provides MORE:
I. ruminant bipass (high) quality, high energy
vitamin and mineral rich protein for
a protein deprived human population!
II. supplemental protein for hog and poultry feed!
III. high quality animal based protein for those who
can afford the best of diets!
but does take calories* from our food supply.
With the growing obesity epidemic in our country,
I think removing nutrient deficit ('empty') calories from our basic human food supply is a potential
advantage of fuel ethanol production.

All of above protein can be shipped at reduced** transportation costs!
If necessary and time permitting I'll continue with
the other points but I think most of you that know
the other 10 points are better writers than I.
Thanks for listening.
*Only calories are consumed by the ethanol process.
Only 1/3 of the corn is consumed by the e. process.
**(3 times as much protein is contained in a ton of corn 'residue' after it goes through the ethanol plant than a ton of corn that went into the ethanol plant.
In some markets, a small portion of the corn 'residue'
can be produced that contains 6-9 times as much protein as the corn that went into the ethanol plant.
Thus less fuel is required to ship the high value food ingredients.)

5:51 AM Aug 20th
 
results
Re: Montie's Aug. 18 request to write your Congressman

While Montie's request is a very important one,
that has great potential to improve our governance,
his extensive and possibly well intended
comment requires a critical 180 degree edit,
to correct 11 critical errors in it's content.

I know that many Congressmen accept information like this, as if it were true. It should come as no surprise if it sounds like the unfounded rhetoric they're being fed by the fossil fuel lobbyists and
so many, so called news media outlets who
parrot (repeat)their message over and over.
What does surprise me is that many who
should know better, don't challenge their 'facts'.

I don't have the time to correct all of it but to begin:
Point One
Processing corn into ethanol does NOT require protein, vitamins or minerals that are vital basic components of our food supply.

As a matter of fact,
a vibrant corn ethanol industry provides MORE:
I. ruminant bipass (high) quality, high energy
vitamin and mineral rich protein for
a protein deprived human population!
II. supplemental protein for hog and poultry feed!
III. high quality animal based protein for those who
can afford the best of diets!
but does remove calories from our food supply.
.
All of above protein can be shipped at reduced** transportation costs!

If necessary and time permitting I'll continue with
the other 10 points but I think most of you that
know the other points, are better writers than I.
Thanks,
LeRoy
*Only calories are consumed by the ethanol process.
Only 1/3 of the corn is consumed by the e. process.
**(3 times as much protein is contained in a ton of corn 'residue' after it goes through the ethanol plant than a ton of corn that went into the ethanol plant.
In some markets, a small portion of the corn 'residue'
can be produced that contains 6-9 times as much protein as the corn that went into the ethanol plant.
Thus less fuel is required to ship the high nutritive
value food ingredients.)

5:19 AM Aug 20th
 
MacFarmer
jerry gulke speakes of a "free market". there are no free markets in farming. It's a controled market. Thats what makes it unfair.Subsidies are the culprit.A free market runs it's own course.Farming has been run by the government since 1948. This has caused the destruction of small farms,high land prices and has nearly destroyed most of our small communities.
5:51 PM Aug 19th
 
- GLENVIL, NE
Hey Montie- Great idea. Lets let b
Brazil produce all the ethanol and ship it here. While your are at it, why don't we get all our automobiles from Japan, all our oil from Iran,all our clothes from Taiwan. Then we could all get a welfare check from Barrack and go to disneyland
6:48 AM Aug 19th
 
m - willington, CT
One thing some writers omit from time to time is the fact when calculating actual cost of producing and blending ethanol into gasoline, analysts use a tremendous amount of "coulda, shoulda, maybe, if then", etc. Lots of seemingly ironclad variables are in actuality mere hypotheses, guesses, estimates, wishful thinking. Mathematical models makes large numbers of suppositions and this is what forces onlookers to have widely differing notions about the financial feasibility of producing ethanol.
1:10 PM Aug 18th
 
Montie - Farmville, VA
As agreed, demand increasing for gasoline, then so does the demand for ethanol, resulting in increased demand for corn. Maybe you can already see the problem that has developed. We have 2 commodities in play here. First the crude oil, as a commodity, it is speculated on everyday. It has been reported that $10 to $15 of the cost per barrel of crude is just speculation. Corn is also speculated on everyday. I'm not sure how much of the price of a bushel is speculation, but rest assured it’s there. The results are not good. We have one commodity, crude, pulling the price of another commodity, corn, higher and higher as demand increases. The savings of ethanol is a farce, in that it cost more to produce ethanol than it saves in gasoline and ethanol based gasoline reduces gas mileage by as much as 25% and causes engine damage and costly fuel system maintenance. If that wasn’t enough, it has driven up the cost of everything derived from corn. As we all know, almost everything we eat has a connection to CORN. This includes beef, pork, eggs, poultry, cereal, cornmeal, prepared foods, corn syrup and even our pet’s food. This list goes on and on for corn use and its byproducts. Now how do we get the corn based products to the consumer? ..... Trucking. So we are paying more for the food we consume as it relates to corn, but we also are paying more in transportation and distribution because of the high price of diesel fuel. Diesel fuel, which in itself has no ethanol, but because gas prices have risen, it too pulls the price of diesel higher and higher. Have I made you sick yet?
With all the plant life available (sugarcane or sorghum) that could be used for producing a less costly ethanol; our government pushed for ethanol derived from corn. As we all know it only gets worse; our government pays subsidies (our tax dollars) for corn production to huge corporate farms and to companies that produce ethanol.
Sadly, we have Americans who can barely put food on the table as it is; and now our government has made it even harder. Our poor Americans have to rely on government food programs and entitlements to feed their families and make ends meet. This is especially true in the current economy.... the very worst economy that our government is responsible for. Now where does the money come from for these government social programs and subsidies?..... The American people who pay taxes. OUR Government has pulled a real number on all of us...this is a real joke. Other countries think we are a joke for using a major food supply to subsidize our gasoline.
24/7 Wall St.
“The high cost of corn has been partially attributed to nearly 40% of the US crop being directed to ethanol production. Some 5 billion bushels of US corn are expected to be used to make ethanol this year.”
“The situation with the end of the $0.54/gallon tariff is a bit more interesting. Should this tariff disappear, Brazilian ethanol could find its way to the US where it would undercut corn-based ethanol pricing. US farmers could see a dramatic fall in corn prices as a result. “ Paul Ausick
Also as a result in the fall of corn prices food cost would start to decline. Americans would have more discretionary income to spend to boost our economy, which in part would help to create jobs that we so desperately need. The Government would save the corn subsidy funding, reduce the cost of entitlement programs which would lessen the need for raising taxes to pay down the enormous Governments debt that it created and expects the American people to pay for. The benefits are many and would have a worldwide affect.
The free trade falls right in line with importing less expensive Brazilian ethanol resulting in a possible lower cost for gasoline and exporting more of our goods to Brazil.
This ethanol issue is one of where a few have the benefits of making a lot of money from Government subsidies and basically doing it on the backs of the American people and adding to our hardship. Let’s turn this around and do something good for the American people instead of doing something to the American people; we’ve had enough of that.

Please write your Congressman and Senators etc. and tell them what you think about corn-based ethanol. Thanks


10:53 AM Aug 18th
 



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