The Sky Is Not Falling (And Even If It Is Falling Ethanol Did Not Cause It To Fall)

[DW11]

What gets me is when people look at ethanol as the reason we will be short on corn during this drought and don't analyze the facts.  Fact: we would not have planted 96.5 million acres of corn if ethanol demand was not here.   Without ethanol, we likely would still be planting 75 million acres of corn.  Maybe less.   But 20 million acres of corn at 130 bpa is 2.6 billion extra bushels of corn that we would not have without ethanol demand.  40% of the nutrient value of corn is returned in the form of DDG's.   Thus, if we use 4 billion bushels of corn for ethanol in 2012-13, 40% of 4 billion gives us 1.6 billion bushels for feed, leaving a deficit of 2.4 billion bushels.  But we raised an extra 2.6 billion bushels because of ethanol, so net net, ethanol raising the price of corn gives us more options for dealing with a once in 50 year drought.

If you are going to criticize ethanol based upon a once in 50 year drought, then at least get the facts straight.  It is my contention that we would be in more of a world of hurt during this drought without ethanol spurring corn demand and ethanol's ability to shut down and come back online in a relatively short time frame.  If all we had was livestock demand, we likely still would have $8 corn because of the drought, although we would just have less options for rationing use.

[GoredHusker]

People aren't criticizing ethanol.  They're criticizing gov't mandates.  If ethanol plants can generate the most profits on a level playing field with no mandates, then by all means convert corn to ethanol.  The gov't mandates insure roughly 4.7 billion bushels will be ground for ethanol regardless of what is out in the field.  

Considering you like to throw acres around, what would the acres of other crops have been if there was no ethanol and we planted 75 million acres of corn?  I'd guess some would have went to wheat which turned out to be a pretty decent crop.  Livestock feeders can feed wheat.  I don't concur at all with the theory drought would have caused 8 dollar corn with just livestock.  We have the smalled cow herd on record.  Even if you take 2.6 billion away from the final crop number, there's absolutely zero way we'd feed that much corn.  How much longer do people believe we'll be relying on crude oil for transportation?  I don't see a bright future for ethanol as electric and natural gas vehicles infiltrate the market.  It's probably not the wisest of ideas to burn the bridge of our longest and most loyal customer for one that might not have much of a future.    

[roarintiger1]

People aren't criticizing ethanol?   Having you been reading lately? Mandate or no mandate there are folks who hate ethanol.

 Burning the bridge of our longest and most loyal customer.  Are you talking about the livestock feeders?  They had no trouble back in the 80s & 90s when corn was $1.50.  Many of them want that price again for obvious reasons.

Without ethanol,  There would be expanding CRP acres......not shrinking acres. There would be more hay and more pastures. Just who raised that hay and had all of that pasture land?   Well, it probably was the livestock producer.   They have wanted in on the higher corn market, so many of them have added to their own problem. Kind of hard to feel sorry for them.

And I will say this again,  There has never been American blood shed to defend our ethanol supply. 

[hwr247]

it amazes me how markets can come down so fast when there is a 20% chance of rain. the fact of the matter is the corn average is still coming down. funny how this spring when all the analysts were saying that anything below 160 would be a disaster.now the politicians are listening to the end users and want to cut the ethanol mandate!!!! I say "WAIT A FRIGGIN MINUTE"  ive had to pay big dollars for seed, fertilizer, fuel,repairs,etc and now they want to cut my income....i thought america was built on the marketplace.....i guess that only plays out when its profitable for the end users.....what a bunch of hypocracy!!!!!

[Farmerjoe79]

It is really sad when these cattle guys have been makin all kinds of money the last 5 years and now they might only make a couple hundred per head. I don't think this will break to many cattle and hog guys cause most are contracted. It will only get rid of the un productive people that probably were not long term anyways. Like I said before it is hog and cattle guys that have been buying up land around my area so they must not be hurting to bad.

[roarintiger1]

The cattle market was up $4-6 yesterday (I read that somewhere).........If there was massive liquidation, the cattle market would be going lower, not higher.   

[highyields]

That $4-$6 up is after a $20 fall in prices.  We have been seeing massive liquidation in the cow herd again this year.  

The cattlmen hasn't been making money all the time.  the cow calf guy has been up to this year.    We have had $1.20 break evens on some of the feedlot cattle.  

I am a cow/calf guy,  I also back ground some yearlings.   I DON'T WANT ETHANOL TO GO AWAY  distrillers grains is a very, very good feed for cattle.  we need ethanol.  we have made our acres and everything geared towards producing large corn acreage and yields.   this is a bump in the road.  Corn ethanol is not maybe the best but its what we got and we will always have corn ethanol around I think. 

[roarintiger1]

highyields,   Thanks for the update and setting things staight on cattle prices.    There still must be pretty good demand for cattle though, right?  I know it's harder for the cattle guys to jump in and out of the cattle business.    How is the supply of feed in your area? Are guys selling the cows because of little to feed them or are they being pro-active and selling before they lose money on them down the road?  

[ag678]

Wait a friggin minute I also thought America was built on the marketplace.  To me that means who ever can pay the most can buy the grain not who the government says has to buy the grain.  People make it seem like if the mandates are cut the government is forcing the ethanol grind to stop, in reality all that is happening is the government is stepping aside and letting the market place decide.  The best case this year is everybody cuts back equally and orderly, and the demand base remains strong the next time we have a big crop.  The worst case is that the demand base is slaghtered and long term everyone is a loser.

[ag678]

http://www.extension.iastate.edu/agdm/livestock/html/b1-36.html

I don't know if Iowa State is a little more scientific on how much the livestock guy is making but they say the feedlot guy has not been making hunders of dollars per head.  I think the number probably looks a little better for most but if you think guys are still making a couple hundred dollars a head I can tell you they have never made that except on a few cases and there were just as many times that they lost a couple hundread.  Also their is no barrier to entry in the livestock business.  If the livestock guy has it so great why not feed all of your grain to your own livestock?  Heck if your not in livestock because it is too much work, just put cattle in a custom feedyard bank your corn and spend all of your time counting your money and buying land, because that is appearently  what the livestock guy does.