March Upfront

Upfront

Boxed soy on the open sea
Representatives from rail lines keep repeating something agribusiness doesn’t want to hear. They say agriculture is a secondary market and that intermodal transportation (containers that can be shipped at sea, by truck or on rail) and large unit trains are the future for rail. But the U.S. Soybean Export Council has figured one way to negotiate that future. It has discovered shipping soy via containers is a viable option.

The move makes logistic sense because 25 percent of shipping containers return to Asia empty. Importers in countries such as China, Korea and Taiwan are importing an increasing amount of U.S. soybeans via bulk containerized shipments. Normally shipments to these countries arrive in panamax vessels carrying over 50,000 metric tons of soybeans, but now importers are receiving 5,000 to 10,000 tons at a time in hundreds of 20-foot containers with each holding 20 tons of soybeans.

Currently 5 percent of U.S. exports are shipped in containers, including identity-preserved shipments such as tofu bean shipments to Japan. But that number is set to grow as bulk containerized shipments hold competitive freight rates compared to large vessel shipments.

Chicago provides the best opportunity for loading containerized shipments as it has the greatest availability of empty containers and highest density of rail lines. Other locations in the Midwest also provide a good opportunity for containerized shipments—such locations include Omaha, Kansas City and Minneapolis.

Cheap oil fuels the economy but not ethanol
Falling oil prices and corn approaching $4 per bushel are calming what some have called “irrational exuberance” in corn-based ethanol facilities. Recently, economists at the Kansas City Federal Reserve took a look at how ethanol performs economically if crude oil prices drop. The focus was on two basic components of ethanol profitability—ethanol and corn prices. Nancy Novack and Jason Henderson did the research and reported the following in the Kansas City Fed’s Main Street Economist newsletter.

“We linked ethanol prices to crude oil prices due to the historical relationship between ethanol and crude prices, while we held natural gas prices constant. We allowed corn prices to range from $1.50 to $2.50 to $3.50 per bushel. Based on historical relationships, ethanol prices ranged from $1.55 to $2.13 to $2.71 per gallon to correspond with crude oil prices that ranged from $40 to $60 to $80 per barrel, respectively.”

The simulations revealed that ethanol profits are highly variable, with potential for losses under high corn prices and low crude oil prices.

As the chart shows, [at $60 oil] ethanol production would be profitable in all cases where corn fluctuated between $1.50 and $3.50 per bushel (blue line). When crude oil prices were assumed to be $80 per barrel and ethanol prices to be $2.72 per gallon, ethanol profits rose under all corn price scenarios (red line). When crude oil prices were lowered to $40 per barrel and ethanol prices fell to $1.55 per gallon, ethanol profits also fell (green line). In fact, ethanol profits turned negative when crude oil and ethanol prices were low and corn prices were high, $3.50 per bushel. In this scenario, losses were estimated at 9 cents per gallon.

Rod Jetton speaks agriculture
At a recent agricultural luncheon at Jefferson City, Missouri Speaker of the House, Rod Jetton, talked about findings from his 2006 Missouri agricultural tour. Jetton offered 10 priorities that need to be explored for the state to build a prosperous rural and agricultural community.

“It is important for people who are affected by these issues to have conversations with their representatives. Tell them how much research affects farming in your district,” said Jetton. “Term limits are the real deal,” he added. “[Elected officials] need advice and now is the time to articulate the issues. I’m not sure how many [representatives] know that we import milk into Missouri—I didn’t until 2 years ago.”

Jetton said agriculture needs to explain that it is an economic multiplier and duly worth the attention of state government. “If you don’t articulate this, somebody else will—and it probably won’t be the result you hoped for,” he said.

Here are Jetton’s ag priorities:
1. Examine use of Missouri feed stock under biofuels incentive funds.
2. Fast track DNR permitting process.
3. Increase funding for the Missouri Agriculture and Small Business Development Authority from $6 to $12 million.
4. Set a long-term schedule for biofuels incentive funds.
5. Create agriculture enterprise zones for farmers, agri-businesses and livestock operations.
6. Increase monies for the tree screen fund.
7. Improve incentives offered to veterinarians entering the large animal field.
8. Fully fund the Life Sciences Trust Fund.
9. Increase monies from $13 to $26 million to create the “Gateway Fund” to support Missouri’s Agriculture Experiment Stations.
10. Increase the number of state inspectors to ensure safety of meat products and to create opportunities for direct marketing to consumers.

Excelling with MorSoy
MFA field crops sales manager Joe Lavelle (left) and Bernie Agri Services manager Jarrod Smith (far right) presented a check to Reed Burleson (center) for achieving high yields with MFA MorSoy seed in the Missouri Soybean Association yield contest. Burleson Farms, Dexter, Mo., achieved third place in the conventional soybean category with MorSoy 3804 yielding 77.5 bushels per acre. The farm also earned a third place for no-till soybeans with MorSoy 3712 at 80.4 bushels per acre and recorded the top-yielding MorSoy in the contest with irrigated MorSoy 3712 delivering 80.6 bushels per acre.

Among MorSoy varieties in the Missouri Soybean Association yield contest, the Weber Brothers farm of St. Charles took both second and third place. Pictured from left to right: Charlie Weber of Weber Brothers farms; MFA field crops area sales manager, Curtis Bruckerhoff; Jim Weber of Weber Brothers farms and Rob Burk, a farmer and part-time employee for the Webers. The Webers grew MorSoy 3991 conventional till with a yield of 68.3 bushels per acre. In no-till, they made 68.2 bushels per acre with MorSoy 3991.

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