Even if the 45¢/gal. blender’s tax credit and 54¢/gal. ethanol import credit expire, and even if the Renewable Fuels Standard mandate were waived, feed prices will be higher in 2001.
That’s according to Bruce Babcock, director of the Center for Agricultural and Rural Development (CARD) at Iowa State University, in a policy brief released yesterday.
“Strong world demand for U.S. corn combined with a competitive ethanol industry would still increase 2011 feed costs. However, the magnitude of the cost increase would be much lower than if all ethanol programs were kept in place,” Babcock says.
In the brief, Babcock projects the price of corn and other feeds, and subsequent production cost, based on different ethanol policy scenarios.
The blender’s tax credit and ethanol import tariff are set to expire Dec. 31 if Congress doesn’t renew them.
As it is, except for a brief retreat in early October, corn, soybean and wheat prices were in a steady uptrend from June 30 through Nov. 9. December 2010 corn futures increased about 70%, while January 2011 soybean futures and July 2011 wheat futures increased about 50%. But the uptrend in crop prices has stalled, says Darrel Good, University of Illinois ag economist.
“The fundamental reasons for the large price increases have been well chronicled. The factors include smaller-than-expected corn acreage in the U.S., declining U.S. corn yield prospects, a rapid rate of corn use for ethanol, a torrid pace of U.S. soybean exports, rising world vegetable oil demand, a significant decline in wheat production in Russia and Kazakhstan, and a very poor start for the U.S. winter wheat crop,” Good says.
He also explains La Niña weather conditions also raised some concern about southern hemisphere crops. In addition, overall demand prospects for U.S. commodities were supported by the declining value of the U.S. dollar and rising energy prices.
Wheat prices have been supported by a nearly 6% decline in world wheat production and the expected decline in U.S. and world stocks. However, Good says those inventories are expected to be at generally adequate levels. More recent concerns center on the poor condition of the U.S. winter-wheat crop and whether Russian wheat production will rebound in 2011. Learn more at www.card.iastate.edu/
For the week ending Nov. 14, according to the National Agricultural Statistics Service:
Winter wheat – 87% has emerged, 9% ahead of last year and 2% ahead of the five-year average. Emergence was nearing completion across much of the Pacific Northwest and Great Plains. 46% is reported in Good to Excellent condition, 18% less than at the same time last year. While recent moisture improved condition ratings in areas of the Great Plains, unusually dry weather negatively affected the emerging crop in portions of the eastern Great Lakes and Southeast.
Sorghum – 93% has been harvested, 28% of last year and 13% ahead of the five-year average.