Written by Jerry Engler Wednesday, 17 October 2007 11:39
| Prices for fall harvest crops such as milo are driven by wheat prices rather tha a demand for ehthanol, according to Rickey Roberts, Marion County agricultural extension agent.
With good prices and a good ongoing fall milo harvest, it’s tempting to talk again about how ethanol production for fuel has propped up grain sorghum prices.
As with most things, though, the market picture is more complex than that. Market experts are say the current surplus of ethanol is difficult to get to markets.
Another factor noted by Rickey Roberts, Marion County agricultural extension agent, is that with wheat prices at a high end, there’s a market concept going on where wheat “buys” acres from other crops, therefore boosting their prices.
For farmers who grow both wheat and fall crops, Roberts said a good fall harvest with good yields will help make up for poor yields from the frozen back wheat.
Dick Tippin, marketing specialist for Cooperative Grain & Supply in Hillsboro, confirmed that the price—$3.30 on Monday —and the demand for milo now are good. But it’s difficult to categorize what portions of the crop are going to what markets.
He deferred to Ted Schulz with TEAM Marketing at Moundridge, which represents the combined efforts of several cooperatives.
Schulz said the demand for milo is more for export than ethanol this year. He said there is “a glut of ethanol, and the price is going down so far.”
Schulz contrasted this to a year ago, when ethanol plants were experiencing big profit margins. With fuel prices so high at the pumps, you might find this a peculiar situation.
“The problem with ethanol right now is one of logistics,” Schulz explained. “It has to be shipped by truck or by rail. It doesn’t have a pipeline system to go through like gasoline does.
“So part of the problem is where do they go with it? It’s backing up at the manufacturing plants. Along with this, there’s high world demand right at a time when the value of the dollar has dropped. Our grain is cheaper in world markets. It’s not a simple equation.”
Roberts said world trade factors have made the United States “the king pin” in grain markets this year.
“We are exporting far more grain than we’ve exported before,” he said. “Russia is a major producer that’s not exporting wheat now. They are trying to keep prices low internally to keep food cheap in the country.
“Australia has had a huge devastating drought. So importers all have to go to someone else for wheat. And, that’s America.”
At one time wheat prices approached $9 a bushel, but then talk of rain brought it down to where it was $8.30 a bushel at CG&S on Monday.
So, why is Roberts talking about wheat when he was asked about milo? For one thing, he said the market is at boom demand today—and the boom is being driven by wheat, not ethanol. He added that the market is volatile. It changes so fast that the prices quoted here are likely to have changed—maybe even several times—before the newspaper actually is in print.
This dynamic, Roberts said, occurs not only because of the markets for individual grains, but how the grains interact.
“What happens is it comes down to a battle for the acres,” he said. “There is only so much cropland. We can’t make more of it. If we want to plant more acres of wheat, we’ve got to buy more acres from another crop, usually soybeans, milo or corn here.
“As the acres expected for those crops goes down, it drives the prices for them up. These acres and these crops come at a price. The market becomes afraid of shortages.
“You can really see this in soybeans, but it’s happening for sorghum and even for corn. That’s even with good supplies. The prices are inching up.
“We’re trying to buy more acres of wheat from these other crops. And, that’s my uneducated opinion about what’s happening.
“Am I wrong? Absolutely. Otherwise, I’d make a lot of money somewhere fast in marketing before this goes to print.
“I will say this with certainty. It’s a good time to be a grain farmer. The farmer’s gross revenue will be up.”
The problem with saying that, Roberts said, is that all of the farmer’s inputs will be up too, for items such machinery, land values, parts and repairs, fuel, fertilizer and pesticides.
He hopes that at least grain farmers will come through with profits after some down years.
Roberts predicted it will be a different story for livestock producers.
“It will take a lot of higher-priced grain to feed livestock through this winter,” he said.
He wasn’t surprised to hear casual observations of cattle numbers down in western Kansas feedlots.
“They have to be cautious with these prices,” he said.
Roberts said he would like to think every grain farmer in Marion County is sharing in the higher market for milo and other grains. But the truth is, the rains needed for production the last half of the month were spotty.
“You could have a very nice rain, maybe a couple of inches, at your place, only to discover that two miles down the road they didn’t get anything.
“On the first of July we’d had the rains that it looked like everyone would have a terrific crop, but with what we had from there, we have to settle for just a good crop. August and September were not good. We turned hot, and dry.
“In the south end of the county, especially around Hillsboro, most crops are looking pretty good. But the north end of the county turned dry, so the crop’s not good for everybody.
“You hear of some 110 to 120 bushel yields, but those numbers may be more like coffeehouse talk—you know, like fishing stories. The yields get a little better the more you talk about them.
“Probably we do have quite a bit of 90- to 100-bushel an acre milo. There also may be some 65-to 75-bushel milo. I hope there’s not much worse, but I really don’t know the very low end.
“I’m sure all of the fall crops will be a far better harvest than what we had in June. The same things true for milo are true for the beans. We have some 40-bushel beans or better, but there’s fields in the north end of the county where they didn’t get 15 (bushels per acre).”
As for next year’s wheat crop, early expectations have to be good with the rain over the weekend getting first growth off the ground.
But, Roberts reminded, it’s a long growing time until next year’s harvest. And it’s part of the farmer’s stress load to have to make that judgment whether he went with the right crop combinations.