The Hancock-Henderson Quill, Inc.
by Dessa Rodeffer, Quill Owner/Publisher
As suspected, after spring planting reports came out with the expected shift of farmers going to soybeans, corn hit a record $6 high with some risk management teams predicting prices going as high as $7.50 this year.
Costs of producing ethanol is expected to raise along with food costs, due to increased demand, the lower carry over of corn, devaluation of the American dollar, and increased funds trading.
Corn for the most actively traded May contract rose 4.25 cents and finally closed at $6 a bushel on the Chicago Board of Trade last Thursday, rising to $6.025 a bushel a new all-time high.
Corn prices have shot up nearly 30 percent this year amid dwindling stockpiles and surging demand for the grain used to feed livestock and make alternative fuels including ethanol.
The U.S. Department of Agriculture projected that farmers will plant 86 million acres of corn in 2008, an 8 percent drop from last year.
Wet and cooler weather in parts of the U.S. corn belt may be a force to send corn prices higher due to a delayed spring planting.
Farm analysts are also advising farmers that Uncle Sam may take increased amounts of their profits if they don't space out their sales of corn.
With corn prices well over $5.82 bushel, many ethanol plants break-even price, corn ethanol economics have gone out the window unless ethanol prices raise from its present $2.20 a gallon price.
Analysts say out of the nation's 147 ethanol plants, only the strongest ethanol producers will survive, with our local Big River Resources included in the "strong" category.
According to Ray Defenbaugh, CEO of Big River Resources LLC, their risk management team meets frequently and have implemented several cost saving strategies.
At present, remodeling of their offices to make a more efficient accounting system and an in-house marketing team are bringing costs down.
Also, the building of the Galva plant is agressively underway with a Spring 2009 opening planned.
Defenbaugh assures that Big River Resources LLC has the balance sheet and efficiencies that will be able to bring a positive return, even with $6 corn. He states, "I have a positive attitude on ethanol's future, and its relationship to rural prosperity inspite of the negative publicity sponsored by big oil and its stooges."