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The Agri Post

March 29, 2013


Ethanol the Beast? By Les Kletke

backfiring and hurting those in the industry that rely on The move to find other uses feed grains as their inputs. for agricultural crops may be Don O’Conner told Grain

World 2013 that the demand for feed grains used for the ethanol industry could be having a huge impact on

Ten-Four Good Buddy, Corn Yields Set to Rise By Les Kletke “Ten-four” could become more than CB lingo for an affirmative answer; it might become the price range for U.S. corn and resultantly the Canadian crop as well. That was the word from Dr. Richard S. Anderson, Executive Vice-President of Informa Economics, at this year’s Grain World Conference in Winnipeg. Speakers unanimously pointed to the grain market becoming a much more continental market but more of a surprise was the price range that he predicted. Andersen, who has nearly 40 years of experience in the commodity markets with various companies and several components of the supply chain, said the uncertainty is a reality and advised producers to be prepared for it. He acknowledged that the drought of 2012 had pushed corn prices to record highs and extremely tight stocks but, with some normalcy in the weather, stocks could be rebuilt quickly and he noted that, due to other suppliers, the U.S. market no longer insisted on as large a carry over as it once required. “There is going to be a huge acreage planted to corn this spring,” he said. “If we see a normal year (weather-wise) we could see yields back around the 163 bushels an acre mark. We have had three dry years and the potential has increased with newer technologies but we have been held back by weather if a normal year the yields will increase along the long term trend line.” Anderson said that Brazil is a factor in the market but remains an unknown with yields and export potential largely unpredictable, “We could see a large crop coming out of Brazil that would have an impact, but as harvest begins that is largely dependant on the weather as well.” Anderson looked back at the pre-harvest price range of $4 - $7.50 for the 2012 crop and said the same thing could happen this year but even more extreme, “We could see a range of between $10 and $4 for this crop.” He stopped short of predicting which would be more likely and indicated that it would be possible to see both price points for the crop that is about to be planted. He was cautious on predicting what the high prices of corn would do in the long term for ethanol production. “We saw the prices this year slowed the production of ethanol,” he said. “But if we see a return to the long term average yields we will see an increase in production. It is dependent on the price of the crop.” Anderson advised producers to keep an eye on the weather across the continent and to be marketing their crop into local strengths in the market. “If you find some spot markets that are paying a premium, be prepared to take advantage of it but keep an eye on the weather for the larger market,” he said.

Stats Canada Releases Spring Planting Intentions By Elmer Heinrichs Canola acres across western Canada could be 4.7 percent larger than the record area planted in 2009 as stated by a Statistics Canada release in its March planting intentions report. Early indications are that prairie producers could plant a record area of 16.8 million acres of canola. Most of that increase is in Saskatchewan as canola acres in Manitoba could drop by 40 thousand acres. Soybean area in Manitoba is expected to rise 8.4 percent to 450,000 acres. Spring wheat acres in Manitoba could increase by 5.9 percent, according to the survey, while oat acres may increase by as much as 17 percent. The area planted to dry white beans could increase by 44 percent to 65,000 acres while coloured edible bean acres are expected to drop by 23 percent to 70,000 acres. The latest report predicts sunflower acres could increase by 6 percent while grain corn area will decrease by 11 percent. Expectations are that flax acres will be cut nearly in half. The planting intentions survey is based on questions submitted to thousands of producers during the final week of March.

feed prices and that could put the squeeze on livestock producers. Livestock producers that were just beginning to recover from a decade of difficult times mainly due to factors outside of their control. Beef producers who were faced with BSE and a weakening of the U.S. dollar relative to the Canadian are just beginning to see a light at the end of the tunnel. Those that have survived in the industry were set to capitalize on strong prices but a run up in feed costs last summer has take a bite out of those profits. O’Conner who is President of S&T Squared Consultants says that the U.S. now uses 40 % of its corn crop for ethanol and the intent to ramp up production until 2022 has had a tremendous effect on corn prices and will continue to do so, even if the expansion is slowed or curtailed. O’Conner was clear that any industry created by government legislation could be slowed or reduced just as easily as it was created. He says that the smaller plants in Canada do not have

as a dramatic impact on removing feed grains from the market and some of the mandated legislation means that alcohol moves from province to province to meet provincial needs. A province like Ontario has less refining capacity than the amount of alcohol required meeting ethanol requirements. Even at this time, it can import the product less expensively from the U.S. He sites the major factor for the industry is crude prices and at $100, ethanol is a viable economic alternative and production will continue even when corn prices increase. The competition in the corn market will have a greater impact on the cattle feeding industry than it will in the ethanol industry. With each province writing its own legislation, it has made for an uneven playing field. The ethanol industry has developed at different rates in various provinces, with seven plants in western Canada and some of these connected to feed lots. It could be a matter of being

Don O’Connor says that ethanol production now uses 40% of the US corn crop but the industry could be reduced if political will changes. Photo by Les Kletke

careful for what you ask for, because you might get it when it comes to the ethanol industry and feed grain production.

AgriPost March 29 2013  

Manitoba agriculture news and features