Corn: > $8 / Bushel -- First Time In Eight Years -- US Decides To Make Ethanol From Corn -- April 18, 2022

Link here.

The Political Page, T+277 -- October 25, 2017

Updates

Later, 638 p.m. Central Time: Obama-appointed San Francisco federal judge refuses to block Trump's order to end ObamaCare subsidies. Huge story. The judge says a) not only is Trump's action likely legal; but, b) he questions all the concerns the plaintiffs have brought, saying in effect, "where's the beef?"


Later, 6:22 p.m. Central Time: the DNC-paid-for-dossier story is moving so fast, Drudge Report had to re-fresh his page twice today -- waiting for the flashing red light!

"Baloney": that's all Hillary has had to say about this story so far. The Hillary War Room will be burning the midnight oil tonight so that "Morning Joe" will have his talking papers in the morning. The dots are starting to connect. During the campaign and after the campaign, Trump never mentioned "the Russians" until well after Hillary mentioned "the Russians." It now makes sense. The DNC and/or her handlers had copped an incredibly great story -- and if it backfired -- blame it on Trump. Trump was blindsided at first because he had no clue what she was talking about. Now it makes sense for everyone involved.

The Los Angeles Times is not reporting the "DNC dossier" story. Wow.


Later, 3:35 p.m. Central Time: it seems journalists for the mainstream media complain about everything President Trump says or does. But I have not heard one journalist complain about Trump's decision to allow the classified JFK-assassination papers to be released tomorrow. Barring any last minute "stay" by some liberal judge, the papers should be released tomorrow. It's my understanding that there really is no mechanism for stopping a president from declassifying classified material. I learned that from the Obama years, but the link is to an article on president Trump. So, we'll see.

Later, 2:31 p.m. Central Time: earlier today a reader sent me a note regarding my link to the Bloomberg article on ethanol (see below). That reader had different views of ethanol than I do, and that's fine. We all have our opinions. Life goes on. But it bothered me that I might have stepped on some toes. I went out for lunch with my wife but that note still bothered me; I hoped I had not been too harsh in my reply.

On return, I found this note in my e-mail (a screenshot):

And so it goes. 

Original Post 

My brother-in-law in California often asks me why gasoline prices remain so high despite the "glut" of oil and how inexpensive oil has become.

I suggest that folks who have that same question read this article. If this link is broken, google Bloomberg Iowa King Corn biofuels RFS.

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The Silence Is Deafening

This is a whopper of a story broken by The Washington Post:

I "never" listen to radio/NPR but today I've had it on all morning to see how they would report this story. So far, radio/NPR has talked about absolutely everything but has not mentioned on word about this whopper of a story. 

If there is one story NPR is focused on today it is Flake's decision to not run for re-election, an anti-Trumper RINO with some saying he has 18% support in his home state. NPR noted that Flake was facing a very, very tough primary after speaking against Trump for the past year. It's not being said that Flake did not want to lose a primary to a woman.

Ukraine Vs North Dakota

The Wall Street Journal is reporting:

Wheat prices rose 2.9%, the biggest gain in three weeks, amid concerns that unrest in Ukraine will slow grain exports from the country and that cold weather will hurt U.S. output.

Corn prices also climbed Friday, reaching a fresh five-month high.

Grain traders speculated that Ukraine's shipments of wheat and corn could decline amid mounting tensions between the country and Russia, which could boost overseas demand for U.S. crops.

So far, the unrest has yet to directly affect exports from Ukraine, which is expected by the U.S. Agriculture Department to be the fifth-biggest exporter of wheat and the third-largest shipper of corn in the current marketing year.

"This unrest could disrupt the ports and shipments, and if that would be the case, the U.S. could see a substantial amount of demand," said Ted Seifried, chief market strategist at brokerage Zaner Group in Chicago.

"At this point, the U.S. and [Ukraine] are the two most competitive countries as far as wheat and corn are concerned. It would be a really big deal" if Ukraine's exports fell.

Several story lines there: the biggest -- I did not realize the Ukraine was fifth in wheat, and third in corn. Second story line: when I think wheat, I think North Dakota. When I think corn, I think Iowa but North Dakota, also, has huge corn industry.

Rugby, North Dakota -- Front Section, Wall Street Journal -- Corn, Global Warming, Great News

As you read the following story, think about the two new fertilizer plants going up in Jamestown, and Grand Forks and the potential for these two plants to transform the economy of North Dakota.

The Wall Street Journal is reporting:

RUGBY, N.D.—Wheat has long dominated the windswept farm fields of the northern Great Plains. But increasingly, farmers here are switching to corn, reflecting how climate change, advancements in biotechnology and high corn prices are pushing the nation's Corn Belt northward.

Last year, corn narrowly eclipsed wheat as North Dakota's most valuable crop as farmers produced a record corn harvest. This year, as farmers across the Corn Belt are finishing up the planting season after an unusually wet spring, the U.S. Department of Agriculture has forecast that 4.1 million acres of North Dakota will be sown with corn, an all-time high and a nearly threefold increase over a decade ago.

The shift, which is occurring in northern Minnesota and Canada's Manitoba province as well, shows how warming temperatures and hardier seeds are enabling farmers to grow corn in areas once deemed inhospitable to the crop. As a result, North Dakota's farmers, who produced 4% of last year's U.S. corn crop and are benefitting from high prices for other crops, are invigorating the state's agricultural economy at the same time its energy sector is thriving.

Corn prices are about double historical norms, driven by food demand in China and other fast-growing countries, as well as the rise of U.S. ethanol production.

While politicians are wringing their hands over a 3-millimeter rise in sea levels over the next century, North Dakota farmers are taking advantage of warmer weather, and perhaps longer growing seasons. What's not to like?

By the way, this complements an earlier story posted by The WSJ talking about the expansion of "North Dakota" hard wheat west into Montana. 

See many, many other stories on North Dakota agriculture and corn by going to the "agriculture" and "corn" tags at the bottom of the blog.

Global Warming, North Dakota, Agriculture, Corn, Rotating Crops

The Dickinson Press is reporting:

In North Dakota, there were 2.2 million acres of corn planted in 2011 and 3.6 million acres the following year.

“Corn has become more popular as growers have moved away from the traditional wheat-fallow system to more intense and diverse rotations and looked for warm-season grass crops to fill a particular rotational need,” Carr said.

The success of corn in North Dakota has made it a popular rotational crop, said Roger Ashley, Dickinson Research Extension Center agronomist.

“Producers have found corn to be an excellent fit in the rotation following wheat, barley, pea and other crops,” he said. “However, we don’t like to see wheat or barley grown after corn because of the increased risk of fusarium head blight in wheat and barley. We can get away with following wheat or barley after corn in some years, but when weather conditions are right for the infection and spread of this disease at flowering and early grain fill of wheat or barley, the disease can cause significant damage.”

According to the USDA, last year in southwest North Dakota, Hettinger County planted the region’s highest number of corn acres — 29,200 acres.

Go to the link for additional information.

That surprises me. Hettinger County is a moderate size county, significantly smaller than some of the larger counties in the oil patch (Dunn, Mountrail, McKenzie, Williams). But the reason it is surprising, it is in the far west of North Dakota. I would have expected the greater corn acreage to have been in the southeast.

But another great story. By the way, this goes along with an earlier story that suggested that durum wheat will be moving farther west into Montana due to warmer weather. 

Another Faux Environmentally Success Story: Grassland to Corn to Fuel For SUVs in NYC

The Bismarck Tribune is reporting, link provided by Don:

A new study documents a loss of 1.3 million acres of grassland over a five-year period in the Western Corn Belt — a rate not seen since the 1920s and 1930s.

The research by Christopher Wright and Michael Wimberly of the Geographic Information Science Center of Excellence at South Dakota State University said a recent doubling in commodity prices has created incentives for landowners in South Dakota, North Dakota, Nebraska, Minnesota and Iowa to convert grassland to corn and soybean cropping.

"Historically, comparable grassland conversion rates have not been seen in the Corn Belt since the 1920s and 1930s, the era of rapid mechanization of US agriculture," the authors wrote.

.... corn and soy production has expanded onto marginal lands with high potential for erosion and drought. The authors compared the land use change rate in the Western Corn Belt to the deforestation of Brazil, Malaysia, and Indonesia, but Wright said it's over a much smaller area.

So there you have. Another faux environmentally success story. Grassland to corn to SUV fuel.

Staggering Corn Production Possible -- Nothing About The Bakken

Check out this graph: looks like oil production in the Bakken.

Corn yields.

So, just after WWII: about 50 bushels/acre.

Then in the 80's: maybe 100 bushels/acre.

In 2000: 140 acres/acre.

Now this story, sent to me by Don: 12-inch rows, hybrids --> 300+ bushels/acre

Narrow-row corn just got narrower. Stine Seed Company planted and harvested 2,500 acres of 12-in.-row corn in central Iowa last year. A hybrid designed for high density production yielded 320 to 330 bu./acre on the cropland.

“(The fields) were up where we had a little extra rain and a little extra nitrogen on it,” reports Harry Stine, president, Stine Seed. “Most of our other yields were much lower with a farm average of 145 bu./acre (mostly 22½-in. rows).”

The trend to 20- and 15-in.-row corn has been around for years. But interest in even narrower rows such as 12 in. has increased as growers seek the elusive 300 bu./acre yield mark.

Absolutely incredible. So, now we have a third "hockey stick" graph to talk about: a) corn yield in the US; b) Bakken crude oil production; and, c) global warming.

Okay, two out of three ain't bad.

According to wiki:

As of 2007, corn became the state's largest crop produced, although only 2% of U.S. production. The Corn Belt extends to North Dakota, but is situated more on the edge of the region instead if in its center. Corn yields are high in the southeast part of the state and smaller in other parts of the state. Most of the cereal grains are grown for livestock feed.

$9.00 Corn; Almost Half of US Corn --> Burned In SUVs; Let Them Eat Cake

Updates

November 20, 2012: why Deere leapt into Buffett's headlights, WSJ.

Original Post

I don't know if folks saw this yesterday, all the hand-wringing over "$9 corn." Apparently this is unheard of, $9 for a bushel of corn. I don't follow corn, but the hand-wringing was quite remarkable. I forgot where I heard it. It was not on television. But apparently $5 corn is high; $9 corn is unthinkable. Again, I don't follow corn, so I don't know. But more to follow, I'm sure.

Now I see that the president won't ease mandate on corn --> ethanol rules.  But this is sheer craziness:

This year’s U.S. corn harvest is forecast at 10.725 billion bushels, the smallest in six years because of the drought. About 4.5 billion bushels will be used to make ethanol in the year starting Sept. 1, or about 42 percent of the 2012 crop, the USDA estimated on Nov. 9.

I believe they feed corn to chickens, but I could be wrong. With genetic engineering, maybe chickens only need steroids. Be that as it may, my hunch is that the price of chicken will go up a bit next year, so much for a chicken in every pot. Unless, of course, the Great Recession of 2013 holds prices down.

Mr Buffett saw this coming. Mr Buffett lives in the heart of corn country. Mr Buffett bought a bit of Deere this past quarter (reported earlier):

Here are two recent catalysts for Deere:

• Warren Buffett's Berkshire Hathaway took an almost 4-million-share stake in this agricultural equipment maker in the third quarter.
• The worst drought in 50 years has led to predictions of the poorest corn crop in over a decade. There are increasing predictions of $9 to $10 a bushel of corn for those farmers who have product to deliver (the rest will get crop insurance, so it's a win/win situation). This should bode well for tractor demand.

The SeekingAlpha.com article was written before the author had knowledge that the government had no plans to ease up on corn --> ethanol --> SUV support program, and so you might as well add that as another bullet.  (GM makes a lot of SUVs, doesn't it?)

What a great time to be a farmer. 

Oh, some back of the envelope calculating:

$337 million / $35 billion market cap: 1 percent of John Deere bought by Mr Buffett

4 million shares bought / 400 million shares outstanding --> 1 percent of John Deere.

That Fertilizer Plant Talked About Earlier? Jamestown, North Dakota

A big "thank you" to a reader or readers for sending me several links regarding this story.

I posted this back in early July:

New billion-dollar fertilizer plant being proposed, from the Grand Forks Herald: 

The North Dakota Corn Growers Association announced Monday that a feasibility study has been completed for the plant, with the steering committee of corn growers and fertilizer industry consultants looking at building the facility in North Dakota, South Dakota or Minnesota. 

The North Dakota Corn Growers Association announced Monday that a feasibility study has been completed for the plant, with the steering committee of corn growers and fertilizer industry consultants looking at building the facility in North Dakota, South Dakota or Minnesota.

Plans are moving along for a $1 billion nitrogen fertilizer plant that could make use of the natural gas now being flared off in western North Dakota’s Oil Patch.

It looks like they might have chosen a site, data points:

• Jamestown, North Dakota; $1.3 billion fertilizer plant; using natural gas from the Bakken
• a capacity of 750,000 tons of anhydrous ammonia/year
• North Dakota Corn Growers Association spearheading the effort
• need to raise $300 million in equity from the farmers; minimum investment: $35 - $50,000/individual
• construction could begin in April, 2015; production a year later
• plant could be paid off in five years

For another interesting story about this site, read the comments below, and go to this link:

http://www.greatriverenergy.com/makingelectricity/newprojects/spiritwoodstation.html

Nothing To Do With The Bakken -- But Implications Just the Same -- China's Demand for Corn

Link here.

I normally wouldn't post a story about corn, but this caught my attention; see if you see what I see. It's obvious.

Grains traded higher  [last week] after a survey of Chinese corn growers shows a need for more imports. Even with record production, growers in that country say it’s not enough to keep up with demand. A survey says corn imports to that country are expected to hit a record high, 5 million tons in the 2011, 2012 marketing season. Last season imports were just one million tons. According to the USDA, China bought 900,000 tons of U.S. corn back in October--the second largest single-day sale in U.S. history. So far this year, corn purchases are up 50%. The National Corn Growers Association says China will continue to be a major market for U.S. grains.

I don't know about you, but when a country needs to increase its imports of a staple by five-fold -- from one million tons in 2010 - 2011  marketing season to five million tons this season -- that catches my eye.

But that was not the most important note. This was the most important takeaway: the Chinese will increase imports five-fold, not because they had a lousy growing season (which always seemed to be the story with the Russians). The Chinese are increasing their imports of corn even as they themselves are producing record amounts. A lot of those American dollars that the Chinese hold will be coming back to American farmers. 

I would assume corn imports correlate with population, and I would assume there is a correlation between corn imports and energy needs: no cause and effect, just a correlation. The same folks in China who enjoy and can afford corn-fed beef, most likely enjoy and can afford automobiles.

China's growing demand for corn leads one naturally to thinking about China's growing need for oil. CNOOC's anticipated purchase of BP's $7.1 billion state in Argentine crude producer Pan American Energy LLC did not materialize. My hunch is that this will have repercussions for the entire oil industry going forward.

Coincidentally, Carpe Diem reports that corn yields have increased six times since the 1930s and are estimated to double by 2030. Other data points:

• Farmers today grow five times as much corn as they did in the 1930s – on 20 percent less land. That is 13 million acres or 20,000 square miles, twice the size of Massachusetts. The yield per acre has skyrocketed from 24 bushels in 1931 to 154 now, or a six-fold gain.
  
  
• The national average of 153 bushels produced on each acre in 2010 was nearly 20 percent larger than the average yield in 2002 – and plant breeding experts estimate yields may jump 40 percent before 2020 and, perhaps, hit a national average of 300 bushels per acre by 2030.

• America’s corn farmers are by far the most productive in the world, growing 20% more corn per acre than any other nation.

North Dakota Hitting On All Cylinders -- Now, It's Corn -- Bakken, North Dakota

Another incredible story for North Dakota -- link here (regional links break early).

Remember all those dire warnings regarding farm crops in North Dakota this year due to flooding?

Data points;

• North Dakota may have record corn production this year -- perhaps third best in history

“If I had to take an educated guess, I’d say this is the best corn crop we’ve ever had,” he said during a drive around tour. “There’s 150 bushels an acre out there.”

He and his dad, Laurance Heger, turned the corner last year, for the first time planting more corn than wheat acres.

Corn, for all its good looks, is much less high-maintenance than wheat. Genetics have made it more drought-resistant. It can stand up to hail and wind damage better and at harvest time, there’s none of that waiting around every morning for dew to dry, he said.

• Corn is selling for an all-time record of $7.11/bushel on the spot market: three times higher than its average historic price
• 40 percent of all corn: cattle feed
• 27 percent of all corn: ethanol
• At $7.00/bushel, ethanol barely profitable; much above $7.00 and ethanol producers will have trouble making money

Single farm: enough corn to fuel a 2008 Malibu for 19 million miles (one farm)
Single farm: enough wheat to make 12 million loaves of bread (one farm)

With corn this high in price, ethanol will increase in price; watch of price of gasoline to go up.

Okay -- Now, It's Getting Serious -- Ethanol Driving Up Price of Ice Cream

Link here.

The article is a human interest story on how the price of ice cream has gone up as a result of numerous global inconvenient truths.

But these two paragraphs caught my eye:

The 700-acre spread, home to 150 cows, mostly Holsteins, is where Toscanini’s ice cream begins. While the prices Hager receives for milk are the highest in more than two years, his costs are increasing faster. Hager supplements the feed he grows — corn and hay — with grain he buys. His grain costs have jumped to $27,000 a month, up $5,000 from a year ago.

Much of the increase is because of the rising price of corn, rooted in soaring crude oil prices and demand for ethanol, the corn-based gasoline additive. Corn exports to China also play a role; US farmers exported about 17 times more corn to China last year than in 2009.

It is not "demand for ethanol." It is the Congressional mandate for ethanol.

Ethanol-formulated gasoline is about a nickel/gallon cheaper. I don't think anyone would miss ethanol-formulated gasoline if it disappeared overnight. Filling a 20-gallon tank costs about $70; shaving off a buck (20 gallon x 5 cents --> $1.00) isn't much of a savings.