September 11, 2007

 

Fuel shortage, high costs hit US corn farmers

 

 

Corn farmers in Midwest US may face harvest troubles this autumn over low sulfur diesel needed for harvesting, particularly in the corn-growing regions of Minnesota, Nebraska and Iowa.

 

Farmers planted the largest corn crop since 1944 last spring after prices hit a 10-year high of US$4.37 a bushel in early 2007. The US Department of Agriculture has estimated a record crop of more than 13 billion bushels this year.

 

In Iowa, fuel shortages are anticipated as retailers report having only about 80 percent of their normal supply, said John Scott, a corn and soy farmer in west central Iowa.  He said corn crops stand in the field waiting for enough fuel supply.

 

Curt Watson, the President of the Minnesota Corn Growers Association, said the fuel terminal that usually supplies his area is dry. His supplier has to drive to another area, where long lines with a wait of four hours are not uncommon.

 

Experts blame a variety of refinery outages for the short supply, including a wave of maintenance closures coinciding with peak harvest season from mid-September through October.

 

Joanne Shore, an oil market analyst with the US Energy Information Administration said refinery shutdowns have created a pulldown of inventories, more so than usual before entering the harvest season.

 

Although sporadic outages are common during the harvest, this year they may be more frequent than usual and retailers may spend more time "chasing the product," Shore said.

 

The high cost of ultra low sulfur diesel, a more environmentally friendly fuel which farmers are required to use for the first time this year, has also undermined the farmer's bottom line, experts said.

 

The diesel problems are adding to overall farmer concerns about the skyrocketing costs of growing corn, which they say will erode additional profits from this year's high prices.

 

Rising fertilizer costs, driven by the soaring prices of the natural gas used to make it, is the main culprit. Fertilizer has jumped from about US$200 per tonne to around US$500 per tonne over the last year which is beyond abnormal as price increases are normally 2.5 to 3 percent, said Watson.

 

Overall input costs per acre of corn have gone up as much as 50 percent over the last year, said Iowa corn and soy farmers John Scott. His production cost has increased from US$350 per acre to around US$500 during the past year.

 

Despite rising costs, higher corn prices may mean that farmers will still be able to eke out slightly higher profits than last year, but not by much, said Scott.