USDA increases total corn supplies

USDA increased corn ending stocks for the 2007-08 marketing year in its latest supply/demand report this morning – to 1.6 billion bushels. That increases the cushion going into the next marketing year. Click here for the full report.

For the next marketing year, USDA increased harvested acres by 100,000 based on the June 30 acreage report. It lowered production, though, by cutting yield estimates another half-bushel. That puts 2008-09 production at 11.7 billion bushels. But if you add in the 1.6 billion carry-in, that gives a total corn supply of 13.3 billion bushels.

USDA also cut corn for ethanol by 50 million bushels (although analysts believe this cut should have been larger). This cut was offset by an additional 50 million bushels going for feed use. In the end, USDA estimated next year’s carry-out to be 833 million bushels, up from last month’s estimate of 673 million.

The 2008-09 marketing year average price was projected to be $5.50 to $6.50 per bushel, up 20 cents on each end
of the range.

Although this report increases overall corn supplies, next month’s report is the biggie. Not only will it give first “real” production numbers, but it will include an updated acreage count based on USDA’s July survey of states that saw significant flooding.

Airlines take off on oil speculators

An interesting email arrived today from Northwest Airlines. Normally these emails are full of exotic destinations they would be more than happy take me to if only I would be willing to buy a ticket. But this one was different. It asked me to visit StopOilSpeculationNow.com and help put a stop to oil speculators that are driving up prices and hurting their bottom line. See this earlier post for more.

Here’s a quote from the letter:

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

When you follow their link, you’re welcomed to S.O.S. Now and an open few paragraphs blasting speculators. It also includes these lines:

Every time you buy products such as food or gas, you are impacted by unregulated, secretive and often foreign commodities futures markets. Speculators in these markets are increasingly buying and selling commodities such as oil even though they have no intention of using the product.

I’m glad to see they make the connection to food.

All the major airlines have signed on, but so have some truck and bus associations, gas and auto dealers groups and the Petroleum Marketers Association – the folks who sell gas, but don’t make it.

Rural Nebraska residents support renewable fuels

A whopping 91 percent of rural Nebraskans believe that “more should be done to develop renewable energy, such as ethanol, biodiesel or wind energy,” according to the 13th annual Nebraska Rural Poll conducted by the University of Nebraska's Center for Applied Rural Innovation. That's a lot of support for renewable energy like ethanol!

High energy and gas costs are having an impact on rural consumers, though: 91 percent said they have cut back on driving, 59 percent have canceled vacation plans and 18 percent have changed jobs to shorten their commute. Download the full report here.

Researchers told the Journal Star, in this article, that that the survey was conducted from March, when gas averaged about $3.20 per gallon, through May, when it averaged about $3.75. Gas is around $4 and holding will only make things worse.

Bruce Johnson, a professor of agricultural economics, told the paper that he hopes the results will prompt Nebraska’s elected leaders to keep pushing the state to become a leader in pursuing renewable energy. “The people of Nebraska are speaking here,” he said. “And there’s a resounding interest in moving this way (toward renewable energy).”

Is America losing its financial independence?

It was easier to ignore imported oil when it cost a mere $30 a barrel. At $140, however, you simply can’t ignore it. And not just because it costs $4 per gallon (or more) at the pump.

What expensive oil imports means is we are sending billions and billions of dollars to foreign countries, and many of these countries are not necessarily friendly to the United States. Take Venezuela. Thanks to high oil prices, President Hugo Chávez can finance his anti-American activities and keep himself in power.

This transfer of wealth also gives oil exporting countries more money to spend around the world. That means they can buy companies, assets and influence.

The McKinsey Global Institute completed an analysis of this, which was reported in a good article in the Wall Street Journal. This chart by McKinsey shows the foreign assets of several oil-exporting countries. Keep in mind this is from 2007 – before the latest run-up in oil prices.

In the WSJ article, Gerald Seib notes that Presidential candidates are trying to “raise awareness of the corrosive national-security effects of oil prices” – and that a real challenge for the next President is to find “common ground on what is now a genuine national-security problem.”

Of course we can’t just turn off the foreign oil spigot. But we shouldn’t close the domestically-produced biofuels spigot, either. In fact, the ethanol spigot is currently saving us about 330,000 barrels of petroleum per day -- its helping to diversify our fuel supply and lead the way for future biofuels.

CRP grazing opened in some areas

Agriculture Secretary Ed Schafer said yesterday that he is releasing Conservation Reserve Program (CRP) acres for livestock grazing in counties recently designated as Presidential Disaster Areas because of flooding. Several Nebraska counties are included.

To be approved, CRP participants must write their county FSA office, obtain a modified conservation plan and receive county office approval before beginning to graze. Participants will experience a 25 percent reduction in their CRP rental payments.

This follows an announcement in May that USDA would allow grazing/haying on more than 24 million CRP acres after the primary nesting season ends for grass-nesting birds.

Nebraska counties involved include:
Adams, Antelope, Arthur, Blaine, Boone, Boyd, Brown, Buffalo, Burt, Butler, Cass, Chase, Cherry, Clay, Colfax, Cuming, Custer, Dakota, Dawson, Dodge, Douglas, Dixon, Dundy, Fillmore, Franklin, Frontier, Furnas, Gage, Garfield, Gosper, Greeley, Hall, Hamilton, Harlan, Hayes, Hitchcock, Holt, Hooker, Howard, Jefferson, Johnson, Kearney, Keith, Keya Paha, Knox, Lancaster, Lincoln, Logan, Loup, Madison, McPherson, Merrick, Nance, Nemaha, Nuckolls, Otoe, Pawnee, Perkins, Phelps, Pierce, Platte, Polk, Red Willow, Richardson, Rock, Saline, Sarpy, Saunders, Seward, Sherman, Stanton, Thayer, Thomas, Thurston, Valley, Washington, Wayne, Webster, Wheeler, York

Crop progress update

Nebraska’s corn crop continues to progress nicely.

Moisture in the form of rain in some areas and irrigation in others has combined with warmer temperatures to push 72 percent of state’s corn crop into good to excellent condition, while 22 percent was fair and only 6 percent was poor to very poor, according to USDA's latest report. A year ago, 80 percent of the state's crop rated good to excellent.

Only 1 percent of the state's crop has reached the silking stage, compared to 11 percent average over the previous five years. Although this shows the crop is a bit behind, that is to be expected considering the cool spring we had -- and this number will increase rapidly over the next couple of weeks.

Nationally, 62 percent of the corn crop is in good to excellent condition, 27 percent fair and 11 percent poor to very poor. A year ago, 70 percent of the crop was good to excellent, 21 percent was fair and 9 percent was poor to very poor.

For details on Nebraska’s crop, click here.

Independence weekend ends with win for ethanol

Team Ethanol won it’s first IndyCar Series race yesterday at The Glen, with driver Ryan Hunter-Reay crossing the finish line first at the Camping World Grand Prix in Watkins Glen, N.Y. This is the second year that 100 percent ethanol has fueled the IndyCar Series – so the win by the Rahal Letterman team was certainly enjoyed by its ethanol company sponsors and corn growers, too.

In this video, Hunter-Reay notes that he’s an American kid winning on one of the best race courses in the country – with ethanol on the side of the car and ethanol in the car.

The win was a great way to close out the Independence Day weekend. With some celebrating July 4 as Energy Independence Day and others Anti-Dependence Day, the win by Team Ethanol couldn’t have come at a better time.

A-FAN open house a success

The Alliance for the Future of Agriculture in Nebraska -- A-FAN -- was one of the sponsors at an open house at Prairieland Dairy near Firth last Saturday. This is a really fun event that allows people to see how a real dairy works -- and what it contributes to the community. This was the fifth open house for Prairieland, which milks about 1,300 head.

There was face painting, milk mustache photos, a corn pile to play in, a hay bale castle, petting zoo, semi tractor rides and a free lunch (with milk and ice cream, of course!).

Tours of the milking facility and barns were fascinating. Did you know electronic ankle bracelets keep track of cow movements? If a cow takes a lot more steps than normal, it's time for her to be bred. Or that within minutes, milk from the cow is cooled from 102 degrees (cow temperature) to 34 degrees and loaded onto a truck? This keeps the milk fresh. And tasty.

If you've heard of A2 milk, you're familiar with Prairieland, as this is where it's produced.

A-FAN handed out green backpacks that included a lot of information on the importance of the livestock industry to Nebraska. Good stuff. This is a shot of the food tent and some of the crowd.

$100,000 gift led the attack on ethanol

That's not my headline up there. I took it from the Houston Chronicle, which wrote a scathing article on how the RFS waiver filed by Texas Gov. Rick Perry got started back in March before being filed in April.

Here's the time line the Chronicle put together:

• March 25 : Poultry producer Lonnie "Bo" Pilgrim meets with Gov. Rick Perry to ask him to seek a waiver from federal mandates for the production of corn-based ethanol.

• March 31: Pilgrim donates $100,000 to the Republican Governors Association chaired by Perry.

• April 17: Pilgrim speaks to nine Republican governors in closed-door conference on energy in Grapevine.

• April 24: Pilgrim's Pride lobbyists and public relations firm Public Strategies meet with Perry's staff on final details of waiver request.

• April 25 : Perry formally requests waiver from Environmental Protection Agency.

• June 24: Perry attends Washington, D.C., news conference promoting waiver. Event was organized by Public Strategies.

I'm not naive enough to believe this sort of thing doesn't happen. But it sure is nice to see it documented in this case. The reporter went through 596 pages of records obtained from the governor's office under the Texas Public Information Act. That's a lot of paper and a lot of good work.

High gas prices hurting restaurants

This really shouldn't be a surprise -- high gas prices are taking a bite out of the restaurant industry.

Twice in an Associated Press article yesterday people were quoted saying that they were eating out less because gas prices were eating up their budget. (The same article noted that two-thirds of people in a survey consider gas prices an extremely important issue -- more then the economy, health care and Iraq.)

Then this morning, an article pops up from a newspaper in Stoughton, Mass. This article does a good job highlighting, on a local level, how higher fuel/gas prices are impacting people's spending habits. Restaurants face fuel surcharges from all their suppliers (and likely the suppliers are paying them from their suppliers), and customers don't have the extra cash to spend eating out.

My guess is there are lots of articles like this out there.

Yet the restaurant industry has come out vocally against the ethanol industry -- which is producing fuel at at lower cost than gasoline and helping to keep gas prices lower across the country, saving consumers billions of dollars. So I guess the restaurant industry wants people to pay more for gas so they'll have less money to spend in their establishments? Crazy, huh?

Here's more craziness - In his blog, DTN's Chis Clayton quotes House Agriculture Committee Chairman Collin Peterson (D., Minn.) saying that oil companies are only using the amount of ethanol they have to - even though using more would save consumers money. Their doing this to hold down ethanol prices. In other words, the cheaper they can keep ethanol, the more they can mark it up at the pump. Gee, thanks, Big Oil.

Let's end with some good news: Biofuels help meet U.S. energy goals.