The Ethanol Industry & Corn Growers
While many Americans are cheering at the drop in gas prices,
ethanol prices are also declining. Joe
Victor, of Allendale, Inc., a Midwest market
research company said in Ag
Weekly, that corn prices are more tightly correlated with the price of
crude oil than any other commodity. Ethanol manufacturers are feeling it. One
of the top three ethanol producers in the United States, VeraSun, filed for
bankruptcy in late October.
Earlier this year the USDA projected that the ethanol
industry would use a third of the nation's corn crop. The booming ethanol
industry and high export demand pushed grain prices to record highs this spring
and summer, but when the global financial crisis reached a head, prices
returned to traditional levels. According to ag economists, if grain prices
remain at current levels, growers could lose money on next year's crop.
A slow harvest and lower-than-expected yields are
discouraging producers from planting the corn acres needed in 2009 to meet
demands. Should growers decide to increase corn acres next year, it likely
means more glyphosate-tolerant corn, putting increased pressure on glyphosate
and glyphosate-tolerant weeds.
But corn growers should not be completely discouraged.
Demand for biofuels, like ethanol, is up because of federal mandates that the U.S. use 9
billion gallons of alternative fuel annually by 2009. Allendale predicts that
just to meet the trend-line demand for corn, corn acres will have to increase
by 3 million to 4 million acres next year.
As growers are deciding what crops will be most profitable
next year, the corn industry is faced with challenges. And, the future is
always uncertain. What factors are you considering when looking at buying seed
for next season?