Corn Price, Production Cost Questions Abound

EPM's corn-focused March issue examines the potential impact of a lower-than-statutory 2014 RVO on corn prices, the rising costs of corn farming, futuristic visions of super-high-yield corn, and one U.S. ethanol producer's corn storage strategy.
By Tom Bryan | February 16, 2014

Throughout the 60-day public comment period on the U.S. EPA’s proposed reductions to 2014 renewable volume obligations (RVOs), the agency received thousands of pleas from American farmers and biofuels producers who voiced a litany of concerns over curtailed biofuels blending. Retreating from the schedule of the renewable fuel standard, they said, could delay E15 implementation, interrupt E85 infrastructure, destroy advanced biofuels market incentives, and discourage innovation and investment. Many of them also said lowering the blending requirement would reduce the price of corn. 

In this issue, we look closely at the latter assertion—that reducing 2014 RVOs might put downward pressure on corn prices—while also examining the high cost of corn production. We discover that certain farming expenses, like land rents, may be decreasing this year, but perhaps not enough to make up for the possibility of $4 corn. As EPM Staff Writer Chris Hanson reports in “Production Price Up,” the bloated outlays of growing ethanol’s principal feedstock, including the cost of fertilizer, seed, acreage and accelerated machinery depreciation, have probably ushered in a higher breakeven point for growers. 

With greater production expenses and new breakeven points in mind, we look at the relationship between corn’s market price and lower-than-statutory ethanol blending. In “Obligation Outcomes,” we see that industry observers think ethanol blending—up to 10 percent—is so deep-seated into America’s transportation fuel supply that even removing the RFS wouldn’t stop it now. So reducing RVOs this year would do little to corn prices, they say, but it would stall advanced biofuels, prolong the E10 blend wall and, along the way, score a victory for Big Oil.      

This month’s focus on corn also takes us inside Green Plains Renewable Energy’s corn storage strategy. EPM Senior Editor Susanne Retka Schill reports that Green Plains is aiming for an enormous storage capacity, large enough to provide its 12 ethanol plants with a 45- to 60-day feedstock supply.

Increased storage capacity will be compulsory for a lot of folks if Dave Nanda’s corn yield predictions come to fruition. As Hanson reports in “Fields of Dreams,” the crop consultant’s vision for 500-bushel-per-acre corn may soon be in reach. If today’s award-winning yields do become tomorrow’s average crops, it sure will be interesting to see what it does to the price of corn and the cost of its production.