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Veteran Advisor

10 Minutes With A Farmer

I just visited today, for 10 minutes, with an Iowa farmer. During the conversation, he mentioned that ethanol plants are bidding up for corn, in his area. He also mentions some other marketing and acreage things that I found interesting. Maybe you can appreciate what he says.

 

Full story:   10 minutes with a farmer

 

Mike

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Re: 10 Minutes With A Farmer

I'm in SE South Dakota, and I also contracted for some corm delivery to a local ethanol plant in March - $3.82 with a +.02 basis. I was going to hold out for a $4 cash price, but am worried about corn acres this year. I can make money at $3.82 so I sold half the bin and will see what summer brings for the other half.

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Senior Advisor

Re: Bidding up the price of corn. It's the snapback from the RINS exemption.

Three years ago, when news of the tsunami of RINS exemptions became know, it was obvious how it would affect the demand & price of ethanol.  RINS is the market mechanism that connects the price of ethanol to the price of gasoline, grant 4 billion gallons of exemptions and the result just what we saw.

  So there's really no reason to be surprised when even half of those exemptions were removed.  It's not all that hard to understand.

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Honored Advisor

Re: Bidding up the price of corn. It's the snapback from the RINS exemption.

Mike I noticed that the only "marketing" he commented on (and those contributing so far) is old crop corn in the bin now.  Which means it went into the bin without being marketed or forward contracted.  And half of last years stored corn is all he was committing.  Yet he might have been locking in a basis contract for delivery next summer so he could price it then.  But not a mention of that '20 corn crop and a flat denial that he is going to increase acres just because bean prices are down.  It is refreshing to hear from someone actually marketing something other than paper.

I appreciate the article, and the affirmation that real marketers keep a distance from the public discourse.

I am not too keen on the RIN discussion but stay pretty up on the local ethanol production and I have seen production slow when corn is tight.  I have seen the basis be better when corn is tight and hard to find.  In the last ten years we have seen ethanol grind corn & Milo in prices from 3.40 to 7.00 and with oil prices from $40 to $120...... RINs wherever they go, but it keeps grinding.... with great feeder demand....   --------- Maybe I am too close to the feeders to see any volatility in ethanol demand, but when I here of plants closing on our marketing blogs yet can't find confirmation.................... It is really hard not to find farmers who do business with most of them and most will confirm their status....... Reading it in a scandle sheet is not a good sourse of information.  Still wondering how many were actually shut down during harvest?  

(Harvest --when corn is most easily acquired, is when our ethanol plants stockpile grain.)

 

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Senior Advisor

Re: Bidding up the price of corn. It's the snapback from the RINS exemption.

I notice the Febr. bid  for  corn Ulysses Ks  coop,  today  is $3.87   - ?  Nov.  20   -  3.93  -- -

Feedlot  bases  adding  how  much - ?

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Honored Advisor

Re: Bidding up the price of corn. It's the snapback from the RINS exemption.

assuming that is todays bid then Ulysses is +5  and +1 new crop... 

Ethanol or dairy  at Liberal is a+30 ----   60 mile

Hooker coop is +10 or $3.92 and Hooker adm terminal is +12 new crop  or $4.04

That is a little lower than a couple weeks back.

Feedlot basis probably +40 or 45 over ulysses in the panhandle for sure...... I am not sure what the big lots south of Ulysses are bidding.  That's north of us and corn don't move north.  Basis gets bigger south and west but that is miles also  Hereford Tx is usually the high point or around Cactus, but then your 238 miles one way from Ulysses.  Cactus is 132 m.  Hauling through the Okla. panhandle is 40 miles and 40 cents but then the world gets bigger.   But the feedlots get bigger too.  6 million head fed to finish annually in that "big" area

 

 

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Senior Advisor

Re: Ethanol plants closing?

The EIA showed a decline in ethanol plant nameplate capacity of 500 million gallons between Jan. 1, 2018 and Jan. 1, 2019 in PADD 2.  They haven't updated the data for Jan. 1, 2020 yet but as of Sept. 2019 the Renewable Fuel Assoc. said there were 17 closings in 2020.  Whether they all shut down permanently is another question but the ethanol RINS thing did come to a head in Oct. 2020.

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Senior Advisor

Re: Bidding up the price of corn. It's the snapback from the RINS exemption.

Figuring  a  minimum  of  40 cents  /  mile  of  fuel  costs  +  other  fixed  costs  of  logistics ,  in - bounding   corn,  over 100  miles  is  not  an  efficient  endeavor  -  -  - 

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Honored Advisor

Re: Ethanol plants closing?

Gasoline is just too cheap to make Ethanol work.  $2.20 regular unleaded and to be worth it E-85 has to be 50¢ cheaper, people aren`t going to hassle with it.  The E-plant that was put up 20 years ago and is out of debt can coast fine, but the expansion in the last 5 years won`t carry it`s weight.  I wish we had $4 gas again, but we have to live in Realville too.

In Mike`s story, that farmer is typical, he takes in stride that there will be lean times following the good times in farming.  I was at a conference and they talked about Ukrainian corn, how they were making money, access to Black Sea.  They have that and cheap land and as much as I hate to admit it, I`m afraid that will happen here, hopefully in conjunction with input prices coming down.

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Honored Advisor

Re: Ethanol plants closing?

Mike

Serrious question here...

Whats with the "Farmer" thing here? I thought we are now all "growers"

Was it because he still had unpriced old crop and not all sold out two years in advance?