Crop failure?

[Phil Thien]

There was an interesting article in the paper this morning about our dwindling supplies of corn (due to ethanol fuel production).

There was another interesting article on news.google.com this morning about some pesticides screwing with the ability of bees to navigate. The bee pollination issue has been uniquely interesting to me.

I got to thinking, what would happen food-wise if we had a U.S.-wide crop failure, or two? What would happen if, for one growing season, we were unable to produce corn? Or soybeans? Or ???

Are there enough calories in storage around the globe to get us through that?

I guess the question is, how many calories does the US/World need a day, and how many calories are in the pipeline?

Any ideas?

[Fred Maiman]

Did anyone ever tell you that you think about the weirdest stuff?

[David Weaver]

Fortunately, corn and beans are basically grown from southern alabama to canada. The corn crop last year or a couple of years ago is probably about as bad as it would get. There are a LOT of irrigated acres in nebraska, kansas, oklahoma etc that will be grown regardless of whether there is enough rain water to make a crop, and a lot of those acres used to be in milo and wheat, the former is more tolerant of drought than corn and trades at the same price, and the latter is much more tolerant of drought.

If there was a serious shortage of corn, you would see a lifting or relaxing of the ethanol mandate and likely partial culling of herds. There would be a glut of meat on the market from farmers who aren't cash deep, but cash deep farmers would probably hold some of their livestock knowing that they could get a good return when the first wave was over and there was still a demand for meat.

There was some herd culling a few years ago when the economy tanked and money went to crop futures for safe keeping or inflation hedging, but eventually most of those farmers bounced their herds back or got out of the business. Row crop farmers are in so much cash now compared to pre-ethanol that I don't think you'd see a lifting of the mandate unless there was an enormous problem with food prices. That's only great for a farmer, though, if they own their acres. If they're renting, it just means that the landowner will see much higher rents and the farmer will have more risk in terms of cash flows, though they will clear more in a good year.

Renters have quintupled the rent on a farm my parents have a share of (as in, showing up at the door saying "we'd like to make an offer to rent and here's our offer"), and it's what I'd call somewhat marginal land. There's so much excess capacity in terms of food that even if the crop was 75% of a normal year, which is probably worse than most disaster years, there would be plenty if the ethanol mandate was lifted and herds were sold to avoid feeding (dropping the feed demand for corn, too). We actually consume (humans) less than 10% of the corn crop on an annual basis, which isn't a shock considering we do consume a lot of meat (that doesn't necessarily efficiently convert corn to calories for humans) and we use a very large % of the crop for ethanol (40% now?).

I hope this doesn't turn into a debate like the disability thread. I've heard some doosies on crop stuff. I suppose there is some trickle down benefit to me (or will be in the future) because of the cash rent price, but I don't agree that it's necessarily right and I don't know how many people I've talked to that have told me the ethanol mandate has no effect on corn price, other crop prices or meat prices, but it's been at least half a dozen. I don't know how anyone who has enough brainpower to walk on their own two feet could believe that.

At any rate, no clue on how much is in storage at any given time, even just on US farms, but it's probably a billion bushels at any given time on farms (not right after harvest), and at its lowest in the middle of the growing season (I saw an article stating that US farm stores were 315 million bushels september 1 a couple of years ago, and that was a record low for recent years). There's about 12 billion bushes of storage capacities just on farms (I did have to look that last part up).

[Steve Rozmiarek]

Phil, the food that we produce pretty much all gets used in a year, so you can imagine the impact. One growing season's complete failure would be devastating to the world. It is a true world economy though, so there is more too it. The corn used to produce ethanol is not a direct human foodstock, it is usually a genetically modified crop, and not allowed for import into many countries. It does feed the worlds livestock though.

South America, China, Australia and parts of Europe are the other major ag producers, and the demand on the world food supply is tight enough that a failure in any of these places is felt worldwide. For example, the Ukraine has been in a drought, and their winter wheat exports have suffered, which have fueled a large price increase in the last few years.

The scariest thing that I know of to the industry is nothing in nature though, us farmers can deal with that. What worries this industry the most, is out of control regulatory pressure. I am being forced to spend ridiculous amounts of money on new fuel tanks, to replace ones that are in perfect condition, I'm loosing chemicals to regulation, so that I have to buy the same thing for much more money in a slightly different EPA blessed blend. I have to hire people to scout and maintain compliance in my fields for "bolters", which are a stage of growth of a biannual sugar beet, so that they don't go to seed and spread gmo seed, never mind the fact that it is impossible in our climate. There are more regulations coming than I can count, from EPA, OSHA, and the rest of the alphabet soup agencies.

The worst threat is banking "reform", it has all banks petrified that the fed will shut them down, so they are not loaning money to ag in a capacity that allows us to fund full production. We each borrow millions, and a tiny change in an ag bank can make it impossible for us to grow a good crop by not allowing a profitable business model.

Long story short, farmers are good at growing things, bureaucracy is not, and when the two mix, bad things happen. It doesn't take much bad to happen here to make people starve, we feed a huge part of the world.

Sheesh, sorry for the speech Phil, guess you hit a nerve.

[Steve Rozmiarek]

I hope this doesn't turn into a debate like the disability thread. I've heard some doosies on crop stuff. I suppose there is some trickle down benefit to me (or will be in the future) because of the cash rent price, but I don't agree that it's necessarily right and I don't know how many people I've talked to that have told me the ethanol mandate has no effect on corn price, other crop prices or meat prices, but it's been at least half a dozen. I don't know how anyone who has enough brainpower to walk on their own two feet could believe that.

I like that David, your point is spot on. It's all a connected economy. Ethanol raises demand on corn which raises prices. Because cows eat corn, beef goes up too. So does anything else a cow eats, because the price of corn per nutrient value makes other nontraditional cattle feeds, like wheat, get used to save money. That causes wheat prices to increase, which drive up the prices of the other flour grains, etc...

The consumer pays for higher prices in the end, but the inflation they cause to get to the end user can be a huge problem. My input costs have tripled since 2006. Oh wait, there is no inflation...

[David Weaver]

Steve, are you a farmer? I am not, but given that my entire background on both sides was farmers and we still have both farms in the family, it's nice to talk to people who still "make stuff" rather than "rent stuff out" (like my family does on both sides, landowners only for more than 20 years now). Things have changed a lot. I think the most disastrous thing that could happen would be something that would keep people from paying back their operating loans for a year (removal of the mandate, etc). Our renter pays us more in rent for dryland corn ground that's very than what it would clear gross based on proven yield prior to ethanol. There is a lot of money tied up now because of the crop prices, and the checks are still good every year for now. The price for used equipment out my way has gone through the roof, too, and there are a lot of BTOs that don't allow the paint to fade on *anything* before they trade it in.

We used to be a diversified farms area, and I guess there still are some. Used to also have a lot of dairies in the 50 head range, and every single person I knew who was in dairy when I was in school is out of it now. Some of them just retired and the kids knew there was money in it, and some have gone to mostly automated layer operations, which must be more stable or something. The dairies that are left that aren't enormous are mostly retirement age folks squeezing a few more years out of their operation by staffing with illegals, because their kids wanted nothing to do with it.

[David Weaver]

I like that David, your point is spot on. It's all a connected economy. Ethanol raises demand on corn which raises prices. Because cows eat corn, beef goes up too. So does anything else a cow eats, because the price of corn per nutrient value makes other nontraditional cattle feeds, like wheat, get used to save money. That causes wheat prices to increase, which drive up the prices of the other flour grains, etc...

The consumer pays for higher prices in the end, but the inflation they cause to get to the end user can be a huge problem. My input costs have tripled since 2006. Oh wait, there is no inflation...

Yeah, all of that, and even beyond that, the corn acreage pushes out other crops. Corn, beans, wheat rotation was common for my area 20 years ago. It's corn on corn on corn on corn on.... now. It puts a lot of threat of replacement pressure on anything else that you can grow in terms of things we could eat directly when you get something relatively easy to manage like corn, why take a chance on anything else (buckwheat, produce, whatever...), especially anything that might be labor intensive.

And as a separate aside....the seed prices...

[Kevin Bourque]

Deer are our biggest problem. We lost at least 25% of the soybean crop last year to those danged varmints!!!

[Darius Ferlas]

Didn't the whole biofuel plan, specifically made from corn, turn out to be a complete fiasco?
I heard from various sources that using 100% of arable areas corn based biofuels could replace around 10% of the conventional oil consumption.

[David Weaver]

I guess it depends on who you talk to. At the time it was implemented there were:
* cries for alternative fuels
* moaning and groaning about gas prices and gas additives and the push of petroleum refiners to use an oil based additive to gasoline instead of ethanol
* super low corn prices with the ability to grow more corn and a lot of marginal acres that were out of production because it didn't make sense to plan them, that makes cranky farmers
* tax incentive dollars just waiting to be spent to buy votes from people involved in the first two bullet points

Every study I've seen (and I haven't looked for a while now) either misses something in describing the energy yield or lack thereof, or misses calculating the actual economic benefit.

I still don't know what it is, but you're right, it has no hope of supply enough liquid fuel for us to all drive with and or use to heat our homes. It might make a lot more sense to burn the corn directly for domestic heat (though that's something that involves interaction, it's not a maintenance free heat).

It takes energy to distill it, but there are uses for the byproducts (dried distillers grains and gluten). I guess it probably takes a lot of energy to refine gasoline, too. It takes energy to provide anhydrous ammonia or dry fertilizer to grow corn year after year instead of replacing nitrogen (albeit at a lower and slower amount) with white clover or soybeans.

Building the plants made stainless steel makers and local trades very happy for a while, but when some of them got shuttered, it also made local investors (some of the farmers I've talked to invested as shareholders in plants) lose a lot of money.

It definitely supports the corn prices, but the unfortunate side effect of that is that it puts pressure on what is economically viable to grow domestically and creates a demand on food supply by mandate, and one that doesn't really do that much to mitigate the price of gasoline.

The market is so wound up in it and farmers and providers of inputs (fertilizers, seeds, equipment, chemicals) have so much interest in keeping the prices high though, good luck ever getting it unwound.

[Myk Rian]

Didn't the whole biofuel plan, specifically made from corn, turn out to be a complete fiasco?

Doesn't everything our government does turn out that way?

[Darius Ferlas]

Doesn't everything our government does turn out that way?

I've got some very strong feelings about governments, not just the US government but I've been around here long enough to know the thread ain't gonna be open for too long if we don't lean more towards purely rational debate. Politics is not rational by its very nature, though your comment is tempting for sure.

Apage satanas!

So just looking at the practicability of the biofules, I would be game if I knew that farmers producing biofuels use biofuels for the entire production process and still can make a lving without any subsidies.

[Myk Rian]

Yeah, I was just throwing that out.
Other pressure on our crops are bio-degradable plastics. I own stock in a company that makes the resins for those products. Those resins are made from corn, tapioca, other crops.

[David Weaver]

So just looking at the practicability of the biofules, I would be game if I knew that farmers producing biofuels use biofuels for the entire production process and still can make a lving without any subsidies.

From a purely rational standpoint, ethanol probably stand on its own without a blenders credit (which offests road taxes or some such thing, I'm not expert on that). I'm not sure if there still is a blenders credit.

It cannot be made without additional energy inputs from outside the system, though, and there is no mechanism now other than regulatory to keep people from using corn to make ethanol. If the price ever went as low for corn or even close, where it was for a while prior to ethanol, it would be HUGELY profitable. (bushel of corn makes about 3 gallons of ethanol, less all of the trouble and strife to make it, but way back when, a bushel of corn was about $1.50-$2. I don't know what it is now....$6?

When it was $1.50 to $2.00, it was cheap to use corn as a heating source, even though you had to visit a corn stove once a day. Once corn went to $6 or $7 (no clue where it is now), that was a much less attractive proposition.

I suppose there are some instances where you can make ethanol out of corn or burn it in a furnace when it would otherwise have been garbage (moldy corn, etc).

[Darius Ferlas]

From a purely rational standpoint, ethanol probably stand on its own without a blenders credit

No doubt about it.
In a few years we will be remembering good old times when gas was $10/Gal, so ethanol will seem like a deal, though an average serving of steak will cost as much as weekly wages.