News from Washington is also a bit discouraging. Next year's federal budget may require the agriculture secretary to make some cuts. The speculation has been the cuts would fall on food and conservation programs. Now there is speculation the cuts could also come in the form of reductions to a variety of farm subsidy payments on which farmers have come to depend.
The debate comes as farmers, already anticipating higher costs of production are entering fields to plant spring crops. Adding to concerns for corn and sorghum producers are reports that a process that has been embraced as industrial panacea may be redefining the market in unexpected ways.
New ethanol plants nationwide have allowed ethanol makers to set monthly records from last August through January. In February, production totaled 169-thousand barrels per day. That's up 39% from a year ago.
This year's production is expected to top 2-point-six (B) billion gallons, up from 2-point-three (B) billion last year.
Higher production levels have caused prices to drop, but there is a "silver lining". Increased production has also created a demand for an ethanol co-product – the distiller's grain which is being used as livestock feed. Demand for the grain is driving prices up 20% from a year ago … and is easing the slump in the ethanol market.
More vexing to corn producers is the knowledge that producing a crop is going to cost more this year. While fuel costs have fallen a bit in recent days, the cost of nitrogen fertilizer has already climbed dramatically.
Worries over the potential of disruption of natural gas supply lines from the war and cold weather demand for natural gas meant fertilizer makers have had to spend more to produce the product.
Last week the price of anhydrous ammonia was $417 a ton -- more than 40 percent higher than last December. Depending on application rates that translates into a production cost increase of six to 12 dollars per acre for corn farmers. This year more than ever farmers will be interested in utilizing application techniques to conserve fertilizer. The effort could benefit both farmers' balance sheets and water quality.