|
If the expansion in ethanol production continues as planned, Iowa, which is usually the nation's top corn producing state, will have almost none of the grain left to export by 2008, a noted Iowa State University economist said Wednesday. Speaking at the 78th annual Soil Management and Land Valuation Conference at Iowa State University, economist Bob Wisner said the rapid growth of ethanol processing is "one of the most significant developments in Iowa agriculture in the last half-century." And, with 77 new ethanol plants planned or under construction in the nation's midsection, that statement really applies to the entire Midwest, he added. Those plants will need about 1.5 billion more bushels of corn than the amount already used, roughly a tenth of the U.S. corn crop last year. "That's a big chunk of new demand that's in the process of being developed at this point," Wisner said.
"I think that here in Iowa and across the Midwest, there is a question of what this will do to crop rotations, particularly corn and soybeans," he added. With farmers already looking at more potential income from increasing corn acreage at the expense of soybeans, Wisner doesn't expect the corn-soybean mix in Iowa to stay the same. But if corn acres remained at the level of 2004, then the amount of corn available to ship out of the state would shrink dramatically. In 2003, Iowa had 803 million bushels of corn left for out-of-state exports after using the rest of the crop for processing and livestock feeding. By 2008, that surplus would be down to only 167 million bushels. As a result, Wisner expects more volatility in the basis, the difference between cash and futures prices. "When those plants run low on grain, they're very likely to bid aggressively to avoid being shut down," he said. He also expects more pressure on country elevators that are set up to ship unit trains of grain out of state, as well as the livestock industry. Some land may come out of the Conservation Reserve Program and go into corn production, but it likely won't be enough to meet ethanol plant demand in some areas. Instead, Wisner believes that by 2010, Iowa could see a drastic shift in crop acreage. In 2004, Iowa farmers planted a corn-soybean rotation that was 45% soybeans and 55% corn. By 2010, he projects the average to be 73% corn and 27% soybeans. This could be tough on the state's new biodiesel industry that makes fuel from soybean oil. "I think the ethanol industry has the upper hand," Wisner said. "I think it is likely to push soybeans -- not completely out -- but to a lower level." Wisner admits there are some unanswered questions about all of this, including what the ethanol industry would do to source grain in years like the drought of 1988 or excessive moisture that cut corn yields dramatically in 1993. |
||||||||||
