Loosening the Grain Belt

Future Impact

The Minnesota Corn Growers Association believes the co-op model for ethanol processing gives corn farmers a more diversified stake in the local economy. Six biofuel processing plants are currently under construction in Minnesota. “Renewable fuels have given us a great way to put more back into local markets,” Hamerlinck says. “This includes construction, jobs, and processing revenue. Those dollars stay here, and that’s the difference between an Archer Daniels Midland [Company]–owned plant and a farmer-owned co-op such as what we concentrate on.”

As demand for corn increases and prices rise, other Minnesota farmers may find their margins decreasing, and livestock and dairy production may decline. Repeated plantings of corn instead of rotating in soybeans may lead to growth in biotech corn market, as farmers will need varieties that are able to resist blights, such as corn rootworm, which often affect crops that haven’t been rotated.

Babcock and several Iowa State University colleagues calculated the bushel price for corn beyond which it would no longer be an incentive to expand ethanol production for the AgBioForum article, “The Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors with Implications for Biotech Crops.” They estimated that—all things remaining equal (e.g., taxes on ethanol, prices of other fuels, such as oil and natural gas)—the breakeven price is $4.05 per bushel. The Chicago Board of Trade’s corn futures—a contract that requires the delivery of corn at a set price per bushel on a future date—surpasses that mark in May 2009. If the price of corn continues to rise, ethanol prices will eventually, too. Does this signal the point at which corn exports become more attractive than processing ethanol?

The article forecasts profitability for co-ops, and corn and livestock farmers who don’t hold a stake in ethanol processing won’t be able to sustain a competitive edge. Hamerlinck makes another argument for keeping corn at home: “You don’t worry about shipping costs, the WTO, all kinds of stuff.”