ILLINOIS CORN FARMERS IN EUROPEAN UNION

Last week while most of the Illinois Corn Growers Association board and staff were in Washington, DC, a couple of our members were in the European Union to learn more about our trading partners there.

study tour, Illinois corn, farmers, mission, tradeThemes for the mission varied.  The group discussed a sustainability certification program that some of our farmer leaders and Illinois ethanol plants have participated in so that they can export to the EU.

They also touched on topics ranging from animal welfare regulations to biotechnology to ethanol imports. Like the United States, the EU is also creating a new version of its “farm bill” (CAP 2013), so they discussed the expected effects of each on agricultural trade and production.

REVOLUTIONING WORLDWIDE TRADE

The Panama Canal Authority exists to produce maximum sustained benefit from (their) geographic position. It’s a geographic position that nations, traders, and explorers have hoped to maximize through the ages.

The U.S. transferred their authority of the Panama Canal back to the Panamanian government in 1997. At that time, studies indicated that the Canal would be at its maximum capacity for transit traffic by the year 2011. The Panamanian Government decided at that time that they weren’t interested in the canal infrastructure losing the potential for added use.

Interestingly enough, the need to expand the canal was known decades ago. The U.S. Government actually started working on the third shipping lane back in 1939, stopping work in 1942 because of WWII. So the Panama Canal Authority used those plans from the 1930s to start the work that has become the current Canal Project.

(In fact, the Panama Canal was designed to handle US Navy ships, like the Texas and New Jersey. They were the “Panamax”class ships of the time.)

The expansion will be complete by 2014, the 100 year anniversary of the opening of the Canal. The project is funded by both public and private investments. The project cost is expected to cost $5.25 Billion, funded roughly in half by a tax in Panama approved by the voters. The other half is provided through an international investment package.

Unheard of in the U.S., the entire project will be completed in a decade. Ten years, start to finish, from design and planning to full opening. It’s been joked (although there’s much truth in this joke) that this entire project will be finished in the time it takes the U.S. to finish a feasibility study.

What does this mean to the average person? Well, it means absolutely nothing in a direct sense. But it’s this kind of incredible engineering and planning that allows us to have our iPads and other widgets, it allows US commodities to access worldwide markets; it means less fuel consumed promising a lower environmental impact. It means jobs. Period. It’s hard to imagine, but it’s a pretty simple formula of a worldwide system that does reach into the home of the average U.S. system.

It’s a bit disturbing, too, that such a phenomenal piece of work can be completed so quickly and efficiently in a third world nation. We have the capacity in the U.S., too, but we just can’t get it done. How frustrating is that?

Tricia Braid
ICGA/ICMB Communications Director

IT’S ALL ABOUT BALANCE

The U.S. Grains Council convened its meeting yesterday, and a theme of the discussion could be summed up by, “What we need is balance.”

Balance…

So many of the challenges we face in agriculture tend to come because of an unbalanced discussion or unbalanced criticisms. These discussions and criticisms commonly come from outside the industry.

Internally, we face balance issues, as well. How do we balance the needs of our many customers? Should one take priority over the others? Do we sacrifice one customer because their needs seem more important than others?

How do we balance the needs of the developing world against the needs of the developed?

And in Illinois, how do we balance opportunities to export corn to other states and the world against the needs of our in-state livestock and ethanol issues?

Is this a micro issue, or a macro one? Balance…

The farmers and industry stakeholders and customers from around the world that are meeting in Panama this week are tackling issues of balance, all within the footprint of the Panama Canal.

I’ll have more about the Canal tomorrow.

Tricia Braid
ICGA/ICMB Communications Director

HAPPY HALLOWEEN!

Corn is arguably the most versatile crop in the world. Normally, we think of corn as food, and food only, when actually, less than one percent of corn in our country is sweet corn. Most people do not realize that corn has many different uses and we still continue to find more. Demand for corn has been at an all-time high in 2011.

The United States is the largest producer and exporter of corn in the world.  This makes the largest net contribution to United States agricultural trade balance of all the agricultural commodities. On average around 20 percent of corn from the United States is exported. The rest we keep for our own uses.

Fuel ethanol has become a huge use of corn materials. By creating fuel ethanol with corn it has created thousands of jobs to our economy and added over 15 billion dollars to tax revenues through the federal state and the local government. This has displaced more than 445 million barrels of imported oil.

By using corn for ethanol we receive multiple products. After using the starch portion of the kernel that is converted to sugar and fermented, the rest of the kernel is used as corn oil and feed for the livestock.

One of the most important uses of corn is to feed livestock daily. Farmers like to use corn to feed their livestock because it has high-protein and high-energy.

Corn can actually help save the environment! One acre of corn can remove eight tons of harmful greenhouse gas.

Did you know corn is also used to made compostable plastics? Corn-based plastics are used in utensils, gift cards, bags, plant containers, water bottles and more. Since they are compostable they will break down eventually.

Not only is corn used to make plastic materials but also there is now fabrics made from corn bio-materials. Corn replaces the oil that is usually used for polyester and nylon. These new fabrics have many advantages; such as they are much softer. Corn bio-materials can also be used to create a tough, stain resistant fiber that is used for carpets.

Researchers are now trying to find even more opportunities to use corn for more petroleum-based products. The opportunities are nearly endless. From antibiotics to the frosting, to pet food to baby food, corn is a widely used crop that we could not get by without.

Hope everyone has a safe and fun Halloween with plenty of candy corn!

Emilie Gill
Illinois State University Student

INDIAN OFFICIALS VISIT A CENTRAL IL FARM

Mr. P. K. Basu, the Secretary of the Department of Agriculture for the Government of India, visited the Jeff Jarboe farm yesterday along with three other high-level officials from the Government of India.

farm visit, indian officials, india, corn, farmer, tractor, wagon, grainThe Secretary and his colleagues were in search of a “typical” farming operation and were hoping to interact with local producers in the Paxton, Illinois area.

The Indian delegation was interested in understanding the role of new production technologies and seed technologies, as well as how the grain is stored after it is harvested. They were also very interested in learning more about the marketing techniques that producers use to market their crop throughout the year and the grain elevator’s role in the marketing of the grain.

The Secretary and his colleagues were shown tillage equipment, corn and soybean planters, tractors, and a combine.

Like most trade teams they found the combine of most interest and were given the opportunity to observe harvest, as well as how the grain is transported out of the field and to the bin for storage.

Most producers that I have met don’t think they do anything special in their daily lives. However, this delegation felt they observed something very special.

In addition, there was also another group from the Federation of Indian Chambers of Commerce and Industry. This group also desires a better understanding of agriculture and how to help develop linkages with the private sector.

This was a historical visit by many in the group as many have never been on a farm in the United States.

This particular visit is not unlike the other approximately 20 international visits per year that IL Corn hosts, visits with, or connects to local suppliers. IL Corn has a vested interest in improving market opportunities for IL corn farmers and visits from other countries like Mr. P. K. Basu and his colleagues are just one important way that we add value to your voice.

Phil Thornton
ICGA/ICMB Value Enhanced Project Director

BRAWN OF 16 MEN ENSURES $17 BILLION U.S. WATERWAYS SHIPMENTS

Four times this year, as many as 16 men working at Lock 52 on the Ohio River near Brookport, Illinois, have climbed onto a floating platform to hook 487 wooden barriers on the river floor to a steam-powered crane.

It takes as long as 30 hours to pull up the wickets, one by one, to form a dam that adjusts water levels to keep the river navigable, a process that’s automated elsewhere. Deterioration of the 82-year-old lock, the busiest by shipping tonnage in the U.S. inland-waterways system, risks a breakdown that could snarl $17 billion a year in shipments of coal, grain, and steel. A project to replace Lock 52 and its downstream twin is 18 years
behind schedule.

American Electric Power Co., the largest U.S. electricity generator, is so reliant on coal barges navigating Lock 52 that its failure may lead to power outages for some of its 5.3 million customers, said Mark Knoy, president of AEP River Operations.

“I want to be careful not to cause too much concern but that’s the reality of the situation,” he said. “Lock 52 is critically important, but any lock failure on inland  waterways would have a direct impact on the economy, not just at our power plants but for oil refiners, steel companies and others.”

Although President Barack Obama proposes spending about 88 percent of his inland waterways budget next year on a project to replace Lock 52 and Lock 53 downstream, work won’t be completed until 2018.

Billions Needed

About 12,000 miles of rivers weave through the U.S. heartland, carrying almost $70 billion in goods annually, according to Waterways Council Inc., an industry group. Lock 52 handles $17 billion in annual shipments, according to the council.

About 20,500 barges operate on the Mississippi River and connecting waterways including the Ohio, Missouri, Arkansas, Tennessee and Cumberland rivers, according to a 2010 report by Informa Economics Inc., a Memphis, Tennessee-based research
firm.

About $7 billion will be needed over 20 years to keep inland waterways navigable, said Rick Calhoun, president of Cargill Marine and Terminal Inc. Minneapolis-based Cargill Inc., which depends on inland waterways to transport grain, is the largest closely held company in the U.S.

Delays caused by lock breakdowns “add to the cost of shipping whether it’s the end product to the consumer or by making products less competitive on the world market,” Calhoun said in a telephone interview.

Advocating Tax Increase

U.S. inland waterways projects are financed by a 20-cents-a gallon fuel tax on barge and tow operators. The tax provides about $85 million a year and is matched by federal funds.

Companies and industry groups are asking Congress for a 35 percent increase in the tax, Calhoun said.  “The only people who pay the fuel tax are the towboat industry, and we’re asking for an increase,” he said.

Congress will consider the industry’s request if the money is dedicated to inland waterways, said Representative Bob Gibbs, an Ohio Republican, who chairs the House Water Resources and Environment subcommittee.

“This is more like a user fee rather than a tax,” Gibbs said in a telephone interview. “If this is something the industry wants, we’ll be willing to look at it.”

Congress allocated $775 million in 1988 to replace Locks 52 and 53, and construction was expected to be completed in 2000, said Cornel Martin, the chief executive officer of the Waterways Council, based in Arlington, Virginia. The estimated cost of replacing Locks 52 and 53 has climbed to $2.1 billion because of the delays, he said.

Funds Diverted

Money has been diverted over the years to emergency repairs on other locks or other projects requested by members of Congress, said Calhoun, who is chairman of the council’s board.

“It’s devastating to see what’s happening to the inland waterways because of lack of funding,” Mike Morris, chief executive officer of Columbus, Ohio-based AEP, said in an
interview.

In 2004, $20.6 million of Lock 52’s funding was redirected to repair the McAlpine Lock in Louisville, Kentucky, after a gate failed, resulting in a 10-day shutdown, according to a
report by the Corps of Engineers. Money to repair the McAlpine Lock was authorized in 1991 but shifted to other projects, the report said.

“We’re seeing that going on across the system,” Martin said. If Locks 52 and 53 were fixed, “it would save shippers hundreds of millions of dollars,” he said.

1,050 Trucks

Obama’s fiscal 2012 budget dedicated $170 million to the Inland Waterways Trust Fund. Of that about $150 million of the amount would go to the Olmsted Dam and Lock project, which will replace Locks 52 and 53.

“We’re on track with funding this year to make the progress we need, but it’s hard to predict if the funding stream will continue or not,” said Carol Labashosky, a Corps of
Engineers spokeswoman.

AEP, which in 2012 will move 36 million tons of coal along the Ohio River to 25 power plants, is bracing for a complete breakdown of Lock 52 by 2015 because of its age and lack of maintenance, Knoy said. That may cause power outages as coal supplies dwindle, Knoy said.

If the lock fails, 1,050 tractor trailer trucks per day would be needed to replace the barge loads, he said.

Lock 52 was down for 32 days in September and October 2010, resulting in as much as 206 hours of traffic delays for AEP, Knoy said. That added $1.70 per ton in costs on 972,000 tons of coal, increasing AEP’s shipping costs by $4.6 million, he said.

 1929 Technology

Nucor Corp., the biggest U.S. steel producer by market value, ships about 4 million tons of raw material, including pig iron, and finished products, like tubing and piping, on the inland waterways, said John Guin, materials manager for the Charlotte, North Carolina-based company.

“A lot of our mills are located by the river and that’s not by accident,” Guin said in an interview. “With the congestion on the highways and railroads and the weight of our
materials, the inland waterways are critical to our business.”

The wickets that make up the dam at Lock 52 lay across the floor of the Ohio River attached to hinges.

When the wickets must be hoisted, two of the 16 men lean over the floating platform’s edge to attach what Labashosky called “oversize crochet hooks” to holes at the top of the wicket. The men hook the wickets one by one to the crane, which pulls them into place to form the dam.

The work is done much the same way as it was in 1929, when the lock opened, said Randy Robertson, Lock 52 lock master, in an interview.

“It’s dangerous, backbreaking work, but it was the technology of the time and we’re still dealing with that technology,” Martin said.

By Carol Wolf

–Editors: Bernard Kohn, Joe Winski

To contact the reporter on this story: Carol Wolf in Washington at +1-202-624-1868 or
cwolf@bloomberg.net
To contact the editor responsible for this story: Bernard Kohn at +1-202-654-7361 or
bkohn2@bloomberg.net

AN EVEN TRADE?

The Renewable Fuels Association released a report yesterday regarding U.S. ethanol exports. According to the report, our ethanol exports are surging partly because the U.S. is the lowest cost producer right now and also because we have extra ethanol we can’t use within our country.

Both of these concepts might come as a shock to you so let me give a brief explanation. Ethanol produced in Iowa is currently $1 cheaper per gallon than ethanol produced in Brazil. Blending 10% ethanol from Iowa into a gallon of gasoline would be $0.11 cheaper than the same blend containing ethanol from Brazil.

I’m not shocked that U.S. farmers and ethanol producers are the most efficient in the world, but I’m sure some are.

And in regards to the second point, we do have additional gallons of ethanol that we can’t use in the U.S. right now. Since the U.S. Environmental Protection Agency will only allow a 10% of each gallon of gasoline to be ethanol, we simply don’t have any more gallons of gasoline to blend into.

But all the summaries and background information aside (you can read that here), there are a couple of take home messages from this data that I just can’t ignore.

First, I wish the world, the government, and the American consumer would notice that American corn farmers are doing EXACTLY as we said they would – they are producing more than enough corn to feed and fuel the world. Corn farmers have grown enough corn to feed all the livestock in the U.S., to export corn to other countries to feed their livestock, to fulfill the needs of all the food markets in our country, to produce all the ethanol that our entire nation can use, and now to ship our ethanol to other countries.

Why did anyone doubt us and when is someone going to notice? American corn farmers can produce corn. They can produce exponential yields using less fertilizer, fewer chemicals, and contributing to minimal soil erosion. When is someone going to stand up and give the corn farmer credit for this incredible story of production and environmental stewardship?

Secondly, and maybe more importantly, why are we shipping ethanol to other countries at the expense of our own energy security!?

To quote the RFA report, “As long as domestic ethanol usage is restricted by the regulatory limitation on 10% blends, the U.S. ethanol industry will be forced to look to the global marketplace for new demand sources. And, as a result, Americans will miss out on the opportunity for greater fuel savings and a healthier, more secure domestic energy supply.”

I admit that I obviously have a bias because I love corn farmers, I love corn, and I love ethanol. But am I the only one thinking that trading our safety, our health, and our cash for more oil overseas because of government rhetoric is crazy?

Dave Loos
ICGA/ICMB Technology & Business Development Director
(and ethanol expert!)

CHINA’S PURCHASE READS LIKE A SUSPENSE NOVEL

It’s sad but true. I enjoy my job enough that I sit on the edge of my seat waiting for answers to the question of the day. Today, that question happens to be Will the Chinese government allow US corn to be unloaded in China?

I know it’s isn’t a question that would keep most of you up at night, but for me, it’s almost like a suspense novel.

Yesterday, China (actually COFCO, the largest oils and food importer and exporter in China) bought six cargos of U.S. corn from Bunge. The shipments are to be delivered between June and September 2010.
This is great news because the U.S. has been waiting to gain entry into the Chinese market for years. We have worked long and hard to ensure that when China needed more corn, they would buy it from us. In 2001, we heard the great news that they had purchased three cargos of corn, but we were all disappointed later when they cancelled them.
Now can you imagine that when I heard the news about China buying six cargos of corn yesterday I was jumping out of my chair? Ok, maybe I wasn’t that enthusiastic, but I was cautiously optimistic that this market was finally open to Illinois corn farmers.
Illinois corn farmers have a lot to gain from new exports to China. We have three river systems … the Illinois, the Ohio, and the Mississippi. We have a comparative advantage when it comes to exporting corn because it’s cheapest for us to get it to a river and load it on a barge. Cargos of corn going to China is great news for the overabundance of corn Illinois farmers are predicted to produce in 2010.
This announcement came just in time.
Except a second announcement came right on its heels – the Chinese inspection papers, or whatever they call the government document that allows US corn to be unloaded in China, haven’t been issued yet. To me, that means another cancellation could be in our future.
I’m on the edge of my seat. I’m waiting to see what happens. I can’t wait to flip to that final page of the story and find out the answer.
What can I say? I love a good story. Instead of a book worm, I’m a corn wor … no wait.

Phil Thornton
ICGA/ICMB Value Enhanced Project Director