I have pointed out that given the record corn crop that we are producing we will need to find 600 million bushels of new corn demand in order to hold corn prices up to breakeven. cost-of-production price levels.
I have also pointed out that were U.S. ethanol consumption to increase from 10 to 11 percent of overall motor fuel consumption, it would produce 500 million bushels of much needed new corn demand.
The motor fuel market is calling for more ethanol consumption, but it is being limited by consumer access to the fuel by the petroleum industry distribution infrastructure.
They do not offer consumers more than E-10 in most systems.
While the petroleum industry is defending its market share by denying availability of ethanol to consumers, why would Central Harvest States Cooperative do that?
CHS CENEX has 1,400 convenience stores across the U.S. and reportedly, only 6 percent offer fuels blended above E-10.
A North Dakota CENEX multi-station manager called to tell me that his stations have blender’s pumps that they can’t use because of internal CHS regulation that mandates that stations carry two gasoline products.
The irony is that to gain compliance with CHS “corporate regulation” only E-10 is recognized as gasoline. The company reportedly doesn’t recognize either E-15 or E-85 as gasoline so those fuels do not qualify as the second gasoline sold along with E-10.
He said that if they don’t follow the company branding regulation they can’t accept CHS credit cards.
The CENEX manager asserted that requests to change the internal CHS regulation to recognize E-15 and E-85 as gasoline have been drowned under company bureaucracy.
The station manager said that the North Dakota Corn Growers Association provides $5,000 incentive for stations to put in the blender pumps, and now they are not functional having been shut down because of the internal CHS regulation on what fuels are mandated by the cooperative for sale.
CHS makes a lot of money and has made many strategically successful investments that have benefited farm cooperative owners so that CHS management are not idiots. However, it appears they do suffer from the same bureaucratic mind lock typical of many big complex management structures.
ND CHS directors have reportedly been told of the problem, but the company responses have been drug out weeks beyond when promised. Just because farmers own them hasn’t made a difference.
All 1,400 CHS CENEX retail stations should be offering consumers E-15 or E-85 through blender pumps given the interest of the cooperative’s farmer owners in expanding ethanol consumption in order to grow demand for corn.
Yet, what Captain Obvious would point out as facts, for some reason has not registered with CHS corporate management. The North Dakota CENEX station manager wants to be selling E-15 and E-85, his stations have the pumps to do so, yet he asserted that CHS store regulation had forced him to shut them off in order to maintain brand requirements.
Not only should 100 perpent of CHS retail stations be selling higher E-blends, but CENEX tank wagon service should be delivering E-15 to farms, too.
CENEX, a farmer-owned cooperative, should be the leader in giving consumers more access to ethanol and in one of the great ironies that I find, has at this point, become an obstacle that needs to restructure its business plan to achieve what should be its mission of serving farmers.
CHS Corporate should have a plan working as to how it achieves giving consumers access to higher ethanol blends in 100 percent of its retail stores by a reasonable date.
They should start by immediately revisiting internal branding regulations that restrict marketing of ethanol through CENEX pumps.
For gosh sakes, use the blender pumps that are there, then put them in all the stations.
The CHS magazine touts new grain handling and transportation infrastructure the cooperative has built all over the world – Argentina, Brazil, Danube countries, Ukraine, Asia and Turkey – that they believe will provide returns on investment to their farmer owners.
Yet it has a substantive U.S. retail convenience store chain, but does little more than similar fuel distribution systems owned by petroleum companies that wish to limit ethanol market access to higher ethanol blended fuel.
Farmers can benefit from the domestic demand growth for the corn they produce by the collective cooperative investment in E-15 blender pumps, as well as ending what are ridiculous internal CHS regulations stymying the marketing growth of biofuel reaching consumers.
Farmer owners need to assert themselves with CHS.
They also need to be their best own customer for higher ethanol blended fuel as their collective demand can move the needle for higher ethanol consumption, growing demand for corn.
The ethanol industry uses approximately 5 billion bushels of corn annually to supply the country an E-10 blend.
Were U.S. ethanol consumption to achieve the level of use equivalent to E-11 through expanded use of E-15, E-30, E-50 or E-85 blends, demand for corn would grow by 500 million bushel.
Farmers need to help themselves by boosting ethanol demand.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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