As the year wound down, corn growers have a lot of balls to keep track of in the air—or maybe knives. Nathanael Thompson, associate professor of agriculture economics at Purdue University, had three pieces of advice for corn growers:
1. Understand and use basis;
2. Don’t hold your crop in storage too long; and
3. Understand carryout charges and pre-harvest marketing opportunities.
In general, Thompson said he recommends that growers keep a smaller portion of their corn in unhedged storage in 2022.
According to James Mintert, director of the Center for Commercial Agriculture at Purdue University, while export numbers will be key for both corn and soybeans for 2022, the corn export numbers look slightly better.
Part of the reason for that, according to Naomi Blohm, senior marketing adviser at Total Farm Marketing, is that corn production numbers are down in China, due to too much rain over the past two years. World corn stocks are at their tightest since 2016. Both Blohm and Mintert believe they are in fact tighter than estimated by the U.S. Department of Agriculture. About 60% of those world stocks are in China, which may be less and of lower quality than has been reported. “China will spread out their feed imports around the world” partly to minimize notice of its increased buying, Blohm said.
Chinese pork supply stabilizing?
On the other hand, China is officially claiming to have reached a plateau with its swine population after years of struggling with African swine fever, and even claims a glut of pork. Ag news sources began reporting a slowdown in Chinese pork imports beginning in August. On Dec. 15, China’s finance ministry announced it will raise import tariffs on most pork products next year, saying the country had rapidly expanded domestic production and reduced its needs for imports. This is important because when China was rebuilding its hog herd, it wasn’t just building back to previous levels, but took the opportunity to revamp its hog production industry, replacing traditional lower-quality feeds with higher-quality grains.
Ethanol picture
The new uncertainties introduced by the resurgence of the omicron variant of COVID-19 have raised new questions about whether lockdowns and travel restrictions will again be necessary. Farmers are paying close attention to is recent action by the Environmental Protection Agency regarding ethanol blend levels.
Earlier in the year, EPA was giving off signals that it might reduce mandated blend levels below those of 2020. It took recent bills in Congress to head off the proposed actions. On Dec. 14, the Renewable Fuels Association, which represents ethanol producers and refiners, thanked Sens. Amy Klobuchar, D-MN, and Chuck Grassley, R-IA, for bipartisan legislation filed that day to prohibit the EPA from reducing the minimum applicable volume of biofuels in transportation fuel once the obligations are finalized for any given year. About a third of the corn crop goes to ethanol each year.
“This bill comes at a critical time,” said RFA President and CEO Geoff Cooper. “Just last week, EPA proposed an unprecedented retroactive reduction to the 2020 renewable volume obligations that were finalized more than two years ago. The RFS was created to provide long-term market certainty for our nation’s ethanol producers and farmers. Going back in time to slash RFS volumes—long after they have been finalized—undermines the purpose and intent of the program and destabilizes the marketplace. We thank Sens. Klobuchar, Grassley, Duckworth and Ernst for working together to ensure the integrity of the RFS is being maintained and EPA is being held accountable.”
The same legislation was introduced in the House of Representatives last month by Reps. Ashley Hinson, R-IA, Rodney Davis, R-IL, Angie Craig, D-MN, and Ron Kind, D-WI.
Cooper noted that EPA’s proposal to revise the 2020 RVO to account for COVID-related market anomalies is unnecessary, as the annual RVO already includes a self-correcting mechanism that causes actual renewable fuel volume requirements to adjust lower with reduced gasoline and diesel consumption.
Summertime E15 barrier action asked
On Dec. 9, six national farm and biofuel organizations wrote an open letter asking EPA to enact new regulations requiring lower-volatility conventional gasoline blendstock in the summertime. This would result in lower tailpipe and evaporative emissions during the summer ozone control season, the groups said, and improve air quality. In a letter to EPA Administrator Michael Regan, the Renewable Fuels Association, American Farm Bureau Federation, Growth Energy, National Corn Growers Association, National Farmers Union, and National Sorghum Producers said reducing the volatility of gasoline by just 1 pound per square inch would yield significant environmental benefits. Regarding air quality, the six organizations referenced and attached a new study using EPA modeling tools, showing that reducing the vapor pressure of conventional gasoline blendstock by one would benefit air quality.
The USDA is now predicting a modest recovery in ethanol usage. Ethanol refining margins have remained near record high levels, Mintert said. “Only a pullback in the economy would slow ethanol,” he added.
Sign up for HPJ Insights
Our weekly newsletter delivers the latest news straight to your inbox including breaking news, our exclusive columns and much more.
Blohm believes there is a tighter corn carryout than what USDA predicted. She does think crush demand will increase. “So many companies need to show carbon reduction,” she told High Plains Journal, and pointed out that four new crush plants will be coming online in the next couple of years.
Input costs
“It’s not a pretty picture” if you don’t have all your input costs locked in for the 2022 growing season, according to Blohm. About half of producers had done so when she spoke to High Plains Journal in mid-December. Michael Langemeier, professor in the department of agricultural economics at Purdue, said corn fertilizer costs are 80% higher compared to last year. And it’s not just cost, but a question of whether it will be available at all, due to supply chain constraints. Langemeier said that for the first time ever, fertilizer costs per bushel are higher than cash rent costs per bushel. He suggested cutting back on nitrogen fertilizer, saying a cutback could save substantial production costs with only a slight yield reduction.
Langemeier thinks that while corn will remain competitive with soybeans on above-average soil, he believes corn acreage will be reduced on drier land to the west.
David Murray can be reached at [email protected].
