The 2014 U.S. corn crop is going to create problems for corn growers. Corn prices are falling below the cost of production and prospects for demand to grow responding to low prices face structural obstacles.
The developing El Nino likely signals a back-to-back record production season in South America followed by another above-trend corn yield in the U.S. in 2015. The U.S. corn carryover could easily grow to 2.2 billion bushels or more from this crop season.
Farmers are being asked to educate themselves in the nuances of the new farm bill, choosing between Agricultural Risk Coverage and Price Loss Coverage subsidy options that are so complicated that most farmers are now responding to them like a deer caught in headlights.
The prospect of having to rely on federal dollars again to pay bills is extremely distasteful to farmers who profess to be self-reliant and independent.
Five billion bushels of U.S. corn now goes to produce distillers dried grains and ethanol that supplies approximately 10 percent of the U.S. motor fuel supply through the standard E-10 bend rate. E-15 has been approved for use in all vehicles made since model year 2001. E-85 is used in all flex-fuel vehicles. Blender’s pumps offer consumers a choice of ethanol blends, typically ranging from E-15-E-30-E-50-E85 blends.
Midwest states need to take the lead offering incentives to retail fuel stations that make it compelling that they install blender’s pumps. The new Sparkey’s station just completed at the junction of U.S. Highways 20 and Iowa Highway 4 offer a row of six new blender’s pumps. Local stations offering me a blender’s pump are the Boondocks in Arnold’s Park, and Star Energy in Spencer. Only 6 percent of 1,400 CENEX retail stations currently offer consumers ethanol blends above E-10. That needs to change.
CHS CENEX needs to pick a date when 100 percent of its stations offer consumers E-15 or higher ethanol blended fuel. The 10 percent blend wall needs to come down and Midwest states, farm organizations, political leaders and farmers need to push it over.
They can set an example for the rest of the nation to embrace American renewable fuel. Moving the needle of U.S. ethanol consumption by just 1 percent from E-10 to where consumption represents just E-11 would require 10 percent more ethanol, which would produce an additional 500 million bushels of corn demand.
I believe that would be enough to increase the price of corn whereby farmers would not need to be supported by government subsidies once again. Will the ag sector sit back and let the taxpayer write them checks to pay bills or will they do all that they can to make their own market?
This challenge starts with the ag sector. If Midwest retail fuel franchises like Casey’s, Quik Trip, HyVee, CountryMart or even farm cooperatives will not offer consumers blending choices to use higher rates of cheaper, cleaner renewable fuels, they are part of the blend wall instead of part of the solution.
Farmers need to step up. They should be ashamed to take a government check for growing corn if they are not expanding their consumption of ethanol.
I don’t know about other farmers but I don’t like $3 cash corn or the bureaucracy of having to elect what and how we receive farm subsidies to attempt to generate the revenue to cover our cost of production. I dislike it enough to use higher-blended ethanol making my contribution to knocking down the blend wall to expand corn demand.
How about you? Farmers are independent, which should mean they are blending ethanol at the farm and making maximum use of blender’s pumps as consumers.
Here is “The Ethanol Challenge – Plan E.” While filling your vehicle at a blender’s pump, video record a challenge to five people to increase their use of ethanol by filling up with higher ethanol blended fuels to “tear down this blend wall.” Ask them to video record themselves tanking up at a blender’s pump and to spread the message through the social media.
My Ethanol Plan E Challenge goes out to Bryce Anderson, DTN climatologist; Chip Flory, the face and voice of Pro-Farmer; Carl Casale, president and chief executive officer of CHS; Bob Stallman, Texas cattleman and president of the American Farm Bureau Federation; Joni Ernst and Bruce Braley, candidates for the U.S. Senate in Iowa.
They all head or are part of organizations that can help facilitate awareness and change. To see my video challenge, go to CommStock’s Facebook page or our website at www.commstock.com.
Corn supply and prices, coupled with ethanol prices should produce a surge of ethanol production in response to the market. Yet the E-10 blend wall represents an obstacle to corn demand being able to respond to market forces due to the lack of retail fuel infrastructure and mindset against expanding ethanol consumption that needs to be knocked down.
Instead of demanding the government do it for us or to pay us subsidies if we don’t, let’s do all that we as corn producers and the ag sector can do ourselves to remove the obstacle of the blend wall so that the market can work as it should. I invite you to take the Ethanol Plan-E Challenge and pass it on.
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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