Loosening the Grain Belt

“World demand for feed grain has expanded,” says Bruce Babcock, an economics professor and director of Iowa State University’s Center for Agricultural and Rural Development. “The dollar has fallen, so that’s helped keep the price [of U.S. grain] attractive. And incomes in developing countries have gone up. In China, for example, they’re demanding higher protein diets, so you’ve got to feed more livestock.” China relies on grain imports to satisfy this growing need.

Just three years ago, in the Iowa Ag Review’s summer online edition, Babcock noted a trend towards reduced corn exports in favor of domestic utilization. “But exports have remained surprisingly robust,” he says. Minnesota is the fifth-largest grain exporter in the nation and third-largest exporter of soybeans and feed grains, according to the U.S. Department of Agriculture Foreign Agriculture Service’s 2005 data. Corn in particular has benefited both from exports and domestic demand.

“It’s important to realize that even with the value-added markets, such as ethanol, we don’t export a higher percentage of processed corn from the state,” says Mark Hamerlinck, the communications director for the Minnesota Corn Growers Association. Why is that? Yields are up and more farmers are able to sustain corn acreage because of the worldwide need for feed and food products, and the domestic demand for ethanol.

Staying Competitive

Does exporting Minnesota corn hurt the state’s biofuel industry? That’s not likely. According to the Minnesota Department of Agriculture, in 2006, Minnesota processed 196 million bushels of corn into ethanol, which accounts for only 15 percent of Minnesota’s total annual corn crop. (The rest of it was used for feed or other processes, or exported.)

The growing ethanol industry here is keeping more corn at home, and changing it into a far more valuable product. The agriculture department says that processing corn instead of exporting it raw can double the value of each bushel. Corn can be made into ethanol, feed, industrial and beverage ethanol, starch, sweeteners, and carbon dioxide.

“As far as export markets go, we’re not against them,” Hamerlinck says. “But wouldn’t it be great if we could keep this product here and add some value? We still export about 50 percent [of Minnesota-grown corn], but we don’t do anything with it beforehand. That surprises a lot of people, especially because there are now 16 ethanol plants in Minnesota, when 10 years ago maybe there was one or two.”

Minnesota produced 550 million gallons of ethanol in 2006, a little over half of which was exported. The rest was consumed within the state, according to the agriculture department.

The drive to process ethanol is in response to President Bush’s mandate to increase the supply of renewable and alternative fuels to 35 billion gallons by 2017 to enable energy independence from oil-rich countries.