The nation's farmers will harvest a record 14 billion bushels of corn, the U.S. Department of Agriculture predicted today.
The big crop has sent the price of corn plummeting, and that's cut costs for the beleaguered biofuel industry and others that rely on the grain.
Minnesota farmers are having a good corn harvest despite some bad stretches of weather, including too much rain early and then drought.
Pete Valentine, grain manager for the Meadowland Farmers Coop in Lamberton, Minn., said yields vary widely in southwest Minnesota, but many farmers are finding more bushels an acre than expected.
"Corn was probably 150 to 200, depending on who caught the rain," Valentine said.
The USDA forecasts Minnesota's $5 billion corn harvest will average about 164 bushels per acre, more than the national average. That would be the fifth-highest yield in state history, though down slightly from earlier predictions.
The bountiful harvest means an oversupply of corn, and that's sent the price of the grain much lower than the $7-a-bushel farmers saw last year, Valentine said.
"Right now we're about $4.18 cash price -- quite a change," he said.
Corn prices could go even lower if the U.S. harvest grows bigger than forecast. The latest agriculture department estimate puts the average at just over 160 bushels an acre.
But that number will increase as the harvest progresses, said Mark Gold, the owner and president of Top Third Ag Marketing in Chicago.
"I believe that the corn number at 160.4 on the yield is still low," Gold said. "I think we're going to be two or three bushels higher when it's all said and done."
WINNERS AND LOSERS
The low corn prices will reduce or eliminate profits on the crop for most farmers. Even now, the price of corn is below what it costs to grow the crop.
But the drop has helped improve profits for livestock farmers, who buy large amounts of corn to feed to their animals. It's also helped revive the ethanol industry, the single-largest buyer of corn in the United States.
"What a difference 90 days make; we had a solid performance in the third quarter," said Todd Becker, president and CEO of Green Plains Renewable Energy, Inc. in Omaha, Neb.
In a conference call this week summarizing the company's third quarter financial performance, Becker said Green Plains' earned more than $9 million - a dramatic improvement over the $1 million loss in the same period last year when corn prices were in record territory.
Becker said the price of corn has fallen so low now it gives ethanol an advantage in fuel markets across the globe.
"I'm not sure there's anybody in the world that can make ethanol cheaper than us," he said.
Becker's company owns an ethanol plant in northwest Minnesota, and plans to buy a second in the southern part of the state.
UNCERTAINTY FOR ETHANOL
Minnesota's ethanol industry produces about $2 billion in fuel a year. But while the price of corn helps, ethanol faces some potential problems. The biggest may be federal action.
As part of an annual adjustment, the Environmental Protection Agency is considering whether to reduce how many gallons of ethanol gasoline companies are required to blend into their fuel. If the EPA cuts the requirement, it could lower ethanol demand, price and profitability.
"Our concern is with arbitrary mandates that force blending more of these biofuels than can be safely used in vehicles," Bob Greco, downstream group director for the American Petroleum Institute, Washington, D.C. He said his organization is is one of the groups pushing for lower ethanol requirements.
Greco said most companies sell a 90 percent gasoline / 10 percent ethanol product, and to meet the EPA mandate currently on the books, fuel companies would have to blend a higher percentage of ethanol into their gasoline. He said that could harm vehicle engines -- an allegation the ethanol industry disputes.
Environmental groups also want the ethanol mandate cut. They say current policy requires so much corn that farmers are planting the crop on vulnerable soils, increasing erosion and causing other ecological damage, mainly to waterways.
The EPA hasn't indicated yet when it will rule on the issue, but many people following the proposal expect it will happen yet this month.
But corn prices are so low they may offset any negative effects on the ethanol industry from a reduction in the mandate.