Corn to "get tight" in a hurry, livestock industry cost may rise
With tiling work complete on the 78-acre US BioEnergy ethanol plant site on the southeast edge of Albert City, it appears as though major earthwork will have to wait until spring as winter finally arrived the first week of the year.
There is no argument from anyone that the plant will raise corn prices in Buena Vista County. Another impact not yet fully anticipated is that on livestock feeders and grain companies who may feel profits tighten.
Kathy Showalter of PlanScape Partners, the development company working with US BioEnergy, said construction contract bids are out for earthwork on the ethanol plant that will need 40 million bushels of corn to produce 100 million gallons of ethanol yearly - more than the total production of the entire county.
Showalter said there will be 20-25 workers at the site beginning this spring with initial earthwork followed by about 125 as construction progresses into summer.
Buena Vista County farmers alone will not be able to supply all the corn needed for the plant. The county currently produces about 25 million bushels yearly, so the plant will depend on product being brought in from miles away as well.
That sounds simple enough, but corn is also needed for local livestock feed supplies, raw and processed. And there are also farmers who will choose to market grain elsewhere than the ethanol plant.
Troy Upah, manager of Ag Partners in Albert City, has been in the process of ironing out a contract to handle the huge corn supplies needed for the plant. "We've had some good discussion with that," Upah said.
Upah suspects corn will come from Clay and other area counties, undoubtedly driving up the cost of feed.
Dave Kier, owner of DFS in Newell, feels that the ethanol plant will be a big plus for corn producers.
"I don't think there's much doubt" of higher corn prices, Kier said. "It will make grain tight in the area," Kier said.
One factor that will also affect corn basis is the location of other ethanol plants, something Kier said will determine the real long-term impact. "Until now, livestock industry has been grain's biggest customer."
If corn prices go high enough, Kier predicted some production could move outside the county to cheaper feed.
Kier knows firsthand the significance of livestock producers on grain prices. He estimates DFS grinds 35,000 to 40,000 bushels of corn daily, using about a third of the county's production. Bringing in an ethanol plant the size US BioEnergy proposes will certainly have added impact.
"It's a major deal," Kier aid. "I don't know how long it really can keep going like this."
Kier said the dry distiller grain byproduct from the plant might not be usable by smaller livestock such as hogs and turkeys due to high fiber and low protein. Who chooses to feed the byproduct, said Kier, will be a matter of economics.
While he favors energy independence, Kier questions why the ethanol industry as a whole should enjoy tax breaks while other industries do not.
"I don't know why the government's helping them at all," Kier said. He said a recent S&P study showed that the ethanol industry can't sustain itself.
While he doubts the corn basis will rise 7 to 10 cents, the level of some estimates, Kier said there will definitely be an impact.
"In the near term, it's going to tighten up basis which is going to affect livestock," Kier said. He suspects there could be a 3- to 5-cent increase in corn prices locally.
Buena Vista County Extension Ag Business Specialist Kris Kohl said for every three bushels of corn processed there will be a bushel of dry distiller grain byproduct. Kohl predicts the byproduct will replace bean meal for a lot of feeders.
Kohl noted that sale of dry distiller grains is essential to the profitability of any ethanol plant. "They can't just sell alcohol and make it go," Kohl said.
Kohl agreed that the plant could increase the cost of feeding livestock. "It has the potential," Kohl said. He said it is entirely possible that corn prices could go beyond Chicago's Mercantile or Board of Trade.
"If we have the corn and the pigs have to eat, the price has to go up," Kohl said. Post-flooding corn hit $5 here in July of 1994.