Survey shows shifts in Iowa corn movement

By Susanne Retka Schill | February 04, 2009
Web exclusive posted Feb. 5, 2009, at 11:04 a.m. CST

Grain elevators in Iowa are losing market share as more corn moves directly to ethanol plants in the state. Two researchers collaborated to find out just how great those changes have been. Chad Hart, Department of Agricultural Economics at Iowa State University, and Tun-Hsiang Yu, Department of Agricultural Economics at University of Tennessee, reported their findings in the paper, titled "Impact of Biofuel Industry Expansion on Grain Utilization and Distribution: Preliminary Results of Iowa Grain and Biofuel Survey." Hart and Yu presented their research at the Southern Agricultural Economics Association Annual Meeting in Atlanta on Jan. 31 to Feb. 3.

Comparing a recent survey with similar ones conducted previously, the pair found country elevators are still the primary market for Iowa grain producers, accounting for 62 percent of corn sold by farmers statewide. The market share for corn processors (including ethanol plants) almost doubled between the 1999 and 2006 marketing years; in 2006, 27 percent of Iowa's corn production was used for processing. At the same time, the market share of livestock feeders and river terminals for corn sales shrunk. However, Iowa livestock feeders remained the single largest end user of corn in the 2006 marketing year at nearly 34 percent. This includes on-farm feeding, direct deliveries from farms to livestock feeders and country elevator sales to livestock feeders. Although the market share of corn utilization in some markets may decline, the researchers noted, the corn volume to those markets is expected to increase as corn production continues to grow.

The pair of researchers analyzed the movements of marketing districts within Iowa. Ethanol plants were particularly strong buyers in the northwest, north central, central and east central districts, accounting for at least one-quarter of corn sales in each district. At least 37 percent of corn sold by country elevators in the three eastern districts went to wet milling processors. During the 2006-‘07 marketing year, the majority of Iowa corn processors (85 percent) utilized dry-mill processes and produced ethanol and its coproducts.

Based on the survey, estimated total nameplate ethanol production capacity was 2.2 billion gallons per year. About 38 percent of survey respondents indicated that their facilities plan to expand their operations by 2012, 23 percent did not plan to expand, and 38 percent were undecided. The survey results implied that for the 2006 marketing year (Sep. 1, 2006 to Aug. 31, 2007), Iowa corn processors produced roughly 2 billion gallons of ethanol, 5.1 million tons of dried distillers grains, and 2.6 million tons of wet distillers grains. For processors that produced ethanol, ethanol sales accounted for 85 percent of their total dollar sales, while sales of WDG and DDG each contributed almost 8 percent of total sales.

While country elevators saw their share in local corn markets decline as direct deliveries from farms to ethanol plants increased, the elevators also benefited from the emerging sales of ethanol coproducts.

Most of the corn utilized for processing in Iowa came from within the state at 92 percent - all of it moved by truck. About 7 percent of the ethanol was used in-state, with 23 percent going to the western United States, 10 percent to the Northeast and more than 7 percent to Southern Plains States. The majority of ethanol went to adjoining states. The questionnaires will be updated for the following year to track quantities shipped to nearby states.

The state's livestock industry used all of the WDG and 30 percent of DDG, with international markets taking just over 10 percent. Western states purchased a quarter of Iowa DDG production while Southern Plains States received 13 percent. Another 10 percent went to the Northeast.

Corn processors were also asked about their use of new technologies. Eighty-five percent said they did not use fractionation in 2006-'07, although nearly 23 percent expect to add the process within the next five years. Another 46 percent did not expect to adopt fractionation. Only 8 percent extracted corn oil, but half said they expect to implement that practice by 2012. The survey also asked about the possible shift to cellulosic biofuels. About 38 percent of processors were not considering adding cellulosic capabilities by 2012, while 62 percent were undecided.