April 4, 2011

 

Cargill's decision may impact domestic corn supply

 

 

Cargill's former Tate & Lyle facility which has the capacity of processing 150,000 bushels of corn daily, purchased from local growers, will initially be producing ethanol, but expand into other bio-based products in time.

 

Once that expansion occurs, said Dennis Plautz, director of business affairs and community growth for Fort Dodge, that capacity could likely double.

 

If that happens, Plautz said, "We'll be a net importer of corn."He said that when Cargill does expand into other products, it is likely to phase out ethanol production altogether.

 

How producers will plan their corn and soybean rotations once the Cargill plant goes active, said Bill Horan, a Knierim-area producer, could see more continuous corn being planted within a trade area consisting of Webster, Hamilton, Humboldt, Calhoun and Pocahontas counties.

 

He said that with soybean yields being relatively static over the past several decades, and because there will be a new market for disposing of the extra corn, the temptation will be there to expand corn acres.

 

The new wet-milling plant could also see the corn basis lowered, so with the ready market for more corn, producers could be enticed into planting more corn-on-corn acres, Horan said.

 

But maybe not, said a Fort Dodge commodity broker and an area ag lender.

 

Ron Mortensen, of Advanced Agriculture Strategies, in Fort Dodge, said decisions are still at least a year away. "We already grow a significant amount of corn," Mortensen said of the five-county region, "and yields are better here" than in other areas around the state.

 

Taets said that because producers have confidence in their hybrids to yield well, and because they understand the soil and disease-resistance benefits of rotating crops, he expects most producers will maintain their traditional corn-soybean protocols.

 

"With solid yields,"Taets said, "people know what they can expect. There's a good return on both (commodities) and it encourages rotations." 

Since other area ethanol plants - POET and Valero - already consume 400,000 bushels of corn daily, the presence of the Cargill facility will definitely have an impact on the corn basis, Mortensen said. The basis is the difference between local cash prices, which are lower than cash prices on the futures market at any time.

 

Keith Dencklau, chairman of the Webster County Board of Supervisors, said that Cargill's facility in Eddyville has, at times, had a zero basis effect on Wapello County corn sales. That facility produces ethanol, high fructose corn syrup and gluten. That plant also has led to the creation of two manufacturers that use Cargill's corn products.