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Cargill impact on local corn supply

By Staff | Mar 31, 2011

FORT DODGE – What can amount to a doubling of the corn demand on a five-county trade area when Cargill’s new wet milling plant goes into operation will have a significant impact on row croppers.

Will there be more continuous corn? Will the basis be trimmed? If there are more corn acres planted, will inputs, such as seed costs, chemical and fertilizers, go up, and create tight supplies?

Cargill said the former Tate & Lyle facility has the capacity of processing 150,000 bushels of corn daily that will be purchased from local growers. It will initially be producing ethanol, but eventually expand into other bio-based products.

Once that expansion occurs, said Dennis Plautz, director of business affairs and community growth for Fort Dodge, that capacity could likely double. If that happens, Pulitzer said, “We’ll be a net importer of corn.” He said that when Cargill does expand into other products, it is likely to phase out ethanol production altogether.

How producers will plan their corn and soybean rotations once the Cargill plant goes active, said Bill Horan, a Knierim-area producer, could see more continuous corn being planted within a trade area consisting of Webster, Hamilton, Humboldt, Calhoun and Pocahontas counties.

Horan, who serves on the U.S. Department of Agriculture’s biofuels committee, said Cargill’s announcement “is the best news for producers. This can generate millions of more dollars that will be spent locally.”

He said that with soybean yields being relatively static over the past several decades, and because there will be a new market for disposing of the extra corn, the temptation will be there to expand corn acres.

The new wet-milling plant could also see the corn basis lowered, so with the ready market for more corn, producers could be enticed in planting more corn-on-corn acres, Horan said.

But, maybe not, said a Fort Dodge commodity broker and an area ag lender.

Ron Mortensen, of Advanced Agriculture Strategies, in Fort Dodge, said decisions are still at least a year away. “We already grow a significant amount of corn,” Mortensen said of the five-county region, “and yields are better here” than in other areas around the state.

John Taets, president of Northwest Bank in Fort Dodge, agrees, saying he is hearing of no plans by producers to expand their corn acres. “We’re in uncharted waters here.”

Taets said that because producers have confidence in their hybrids to yield well, and because they understand the soil and disease-resistance benefits of rotating crops, he expects most producers will maintain their traditional corn-soybean protocols.

“With solid yields,” Taets said, “people know what they can expect. There’s a good return on both (commodities) and it encourages rotations.”

Since other area ethanol plants – POET and Valero – already consume 400,000 bushels of corn daily, the presence of the Cargill facility will definitely have an impact on the corn basis, Mortensen said. The basis is the difference between local cash prices, which are lower, than cash prices on the futures market at any time.

Keith Dencklau, chairman of the Webster County Board of Supervisors, said that Cargill’s facility in Eddyville has, at times, had a zero basis effect on Wapello County corn sales. That facility produces ethanol, high fructose corn syrup and gluten. That plant also has led to the creation of two manufacturers that use Cargill’s corn products.

“Even if they lower the basis by 10 cents,” Dencklau said, “it’ll be good for agriculture.”

Welcome news for E-15

Lucy Norton, managing director for Iowa Renewable Fuels, said Cargill’s announcement is good news for the industry which must blend E15 for vehicles manufactured in 2001 and later. The Environmental Protection Agency is finalizing its labeling and other rules governing E15 for a summer start.

“This will make additional ethanol gallons available,” Norton said. She added that the timeliness of Cargill’s start is also good. She said by the time the plant is operational, there will be more infrastructure in place to deliver higher volumes of ethanol to blenders.

She said that by 2014, 85 percent of the cars that are capable will be burning E15.

“That’s a need for 7 billion additional gallons,” Norton said, “and that’s equal to Iowa’s total production in 2010.”

Contact Larry Kershner at (515) 573-2141, Ext. 453 or at kersh@farm-news.com.

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