I just don’t get it!
For those of you not connected to grain marketing or farming you will have to patiently wade through today’s comments as I rant.
Yesterday the EPA proposed that Grain Sorghum, milo to those who really know things, qualify as a feed stock for Advanced Biofuel production. That classification would allow ethanol producers who use such feed stocks to sell their end product at a higher price. Mind you that Grain Sorghum is already used in many ethanol plants as an alternative to corn, when corn is hard to find or too high priced relative to milo. There has not been an extra incentive.
What got my attention and prompted this writing was the wording in the AP news release “…critics complain too much corn is going to energy production…More grain sorghum going to fuel production is unlikely to spark the same complaints, because it is not the main ingredient in a number of foods. While it can be used in human food, it’s sold mainly to feed poultry, cattle and other livestock.”
Until the ethanol industry took off most corn raised in the US was used mainly to “feed poultry, cattle and other livestock”. Corn was used primarily to feed the things that feed us just like milo.
Marketing lesson one…Most farmers that can grow milo have a choice of what to grow, in our area its wheat, corn, milo, soybeans, or cotton depending primarily on water and what the producer feels will provide him with the best profit margins. Even if the use of milo would not directly take food off of the American table artificially encouraging milo production over wheat for example could. There is a finite number of arable acres, granted those are partially and artificially limited by other governmental policies but that is the subject of another blog. My point, swing enough acres to milo and other prices have to get higher wheat, cotton, etc.
Marketing lesson two… Milo is drought tolerant but when there is adequate water it does not produce as much as corn. Artificially switch acres to milo by distorting the price relationship and you run the risk of growing crops that produce less efficiently. Such as requiring more water (another precious commodity) and growing less food per gallon of water. Meaning everything made from those inefficiently produced crops cost you more.
Marketing lesson three.. Grain Sorghum or milo is so interchangeable with corn that’s its price moves almost in direct relationship to corn, most livestock feeders consider it to have a relative value to corn and its price runs between 85% and 98% that of corn. If the milo price is artificially supported above that level feeders loose a cheaper alternative and your beef, chicken, pork, lamb, or eggs will cost you more.
Marketing lesson four.. Ethanol producers don’t need milo or corn they need starch or sugars. When it is economically viable ethanol producers use milo, corn, wheat, straw, potatoes or sugar cane, if you can turn it into an alcoholic drink you can make a fuel for your car, some things just cost too much to make into fuel profitably. Grow a cheap plentiful source of sugars and the ethanol produces will be knocking at your door. Corn is used because of our ability to produce it here in this country and its cost effectiveness. Use an item as your main ingredient that costs more to produce and the end product has to cost more. In this case your fuel will cost more.
Government lesson one… learn to quiet your critics regardless. We are experiencing a drought that touches most of the grain producing world. Much of the world is suffering from an economic upheaval. We are engaged in conflicts that few understand. Let’s not fix our budget shortfalls, let’s not address a long term farm bill, let’s not figure out how to extract ourselves from war torn countries, let’s not create a viable solution for energy independence…
Let’s just quiet the critics.
Think I am beginning to understand why I made a C- in my US Government class
David
