Iowa Public Television

 

Ethanol Leaders: Drought's High Corn Prices Not A Problem

posted on November 30, 2012


HOLLAND, Mich. — Michigan leaders in ethanol say the summer’s drought, and a resulting spike in corn prices, won’t disrupt their efforts to grow the industry.

“The corn market has responded to the lower production supply,” said Zeeland’s Cliff Meeuwsen.

Meeuwsen is the president of Zeeland Farm Services. He also has interests in ethanol production plants around the country. Meeuwsen’s pickup truck burns the ethanol-based E85 fuel, and he doesn’t miss an opportunity to sing the praises of the ingredient.

“Ethanol is the cleanest-burning liquid fuel in the world today, and it's readily available,” he said. He said other customers of corn products adjusted their demand for the products as prices rose.

“The livestock area has cut back,” he said. “The ethanol industry and all industries in the agriculture sector will adjust to the higher price of corn, as we have in the past.”

A reduction in the corn supply has pushed prices higher, and the higher prices, in turn, push demand down.

“It’s economics 101 in its purest form,” said Jim Zook, executive director for the Corn Marketing Program of Michigan and the Michigan Corn Growers’ Association. “We knew that the market will always adjust and ration supply accordingly.”

Zook — who helped build and manage an ethanol plant in Lake Odessa — said the ethanol plants are able to pay for the corn, despite the higher prices; and they can still be profitable enterprises, despite financial pressure, if they are careful.

“The cost of the corn is the No. 1 expense for a fuel-grade ethanol facility,” he said. “It does put pressure on their margins. ... It requires an individual to really pay attention to the detail of their operation.”

Michigan's five ethanol production facilities produce 250 million to 270 million gallons a year, Zook said.

In Michigan this year — unlike other drought-hit states such as North or South Dakota — there is plenty of corn for ethanol production, Zook said.

“It’ll all be taken care of domestically,” he said. “We will not have to import corn.”
Michigan State University field crops educator Bruce MacKellar said the state’s corn crop has been hit-or-miss.

“Yield reduction has been kind of all over the board,” he said. Counties along the south of Michigan were among the hardest hit, with some areas yielding 10 bushels or less per acre, or 70 to 80 percent less than normal, he said.

“Allegan and Ottawa counties definitely had some dry spots in them,” but reductions ranged from 20 to 50 percent, he said.

Corn prices jumped during the summer but have gradually come down, he said.

“They’re kind of in the middle right now,” he said.

 


Tags: altenrative energy corn prices drought ethanol Michigan