Ethanol is changing everything in American agriculture, economist Richard Brock says. "I've never seen such volatility. It's unbelievable," says the publisher of The Brock Report (www.brockreport.com) and president of Brock Associates, a Milwaukee, WI-based farm market advisory firm.
He tells BEEF Cow-Calf Weekly that drier weather and moisture-sapping winds in the Corn Belt have aided corn planting of late, with 53% of the crop planted as of Sunday, compared to just 23% the week before. What's concerning, however, is the effect of the cold, wet weather that delayed planting in some areas this spring, and forced replanting in others, likely affecting eventual overall yield in both cases.
He sees the 3rd and 4th quarters of 2007 and the 1st and 2nd quarters of 2008 as the most concerning periods in the short term. "We need above-trendline yield in corn and, if we don't get it, it will cause serious trouble. Any level of weather at all in the next two months and the corn market will explode," he says.
With 152-bu./acre corn being the trendline yield, he says spring conditions leave him skeptical that the level can be reached. He says 89 million acres is now the lowered estimate of planted corn acres for 2007, down from the 90.5 million acres cited in USDA's March 30 Prospective Plantings report.
"Draw a line through central Kentucky to Missouri and that's the corn crop that was frozen out and killed. They've had to replant, and some of that didn't go back to corn. We've lost at least 1 million acres in the South due to the freeze. The concern is now acreage and weather," he says.
The livestock industries are generally living hand to mouth at this point, with little grain usage booked ahead. If weather causes buyers to scramble, an incredible bull market lies ahead, he says.
One concern is where the burgeoning demand for corn will be sourced. With a half-dozen ethanol plants currently under construction in California, he wonders how the grain stocks and the transportation requirements can be met.
"Sixty-three percent of this year's corn crop in Iowa will go into ethanol production, and all of next year's crop. There won't be enough corn in Nebraska to feed the Nebraska industry as well as the California ethanol and livestock industries," he says.
A 155-bu./acre corn crop could meet the coming demands but that level has been out of reach the past three years, Brock points out. And a total of 94-million acres in corn will be needed next year to meet demand.
While cellulosic ethanol has been depicted as promising relief in the biofuels arena, Brock says practical cellulosic ethanol production is no closer than five years. "And that's really just a number pulled out of the hat," he says.
Landowners have benefited the most from the ethanol juggernaut -- with cash rents, as well as the cost of anhydrous ammonia, having doubled since January. He expects the grain boom to accelerate consolidation as owners of smaller farms who are pondering retirement pencil out the profit and decide to rent or sell out. "We're rapidly moving toward the 3,000- to 5,000-acre units in grain production as the average," he says.
John Deere stock has hit a 4- to 5-year high, though equipment sales aren't warranting the move. "It's all anticipation at this point," driven by the booming grain market, Brock says.
-- Joe Roybal