This Fall: Corn Supply up, Soy Supply down

Two reports released today by the Agriculture Department show a big jump in both planted acreage and stocks for corn, pointing to greater corn supplies this year, which could encourage the Environmental Protection Agency to increase its ethanol blend rate, according to Terry Francl, senior economist with the American Farm Bureau Federation.

“For the 2009/2010, the greater availability of corn supplies makes it more likely that the EPA will increase the ethanol blend rate from the current 10 percent to 12 percent or 13 percent, effective Jan. 1, 2010,”

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As for soybeans, Francl said the 12 percent drop in soybean stocks, compared to June 1 of last year, points to a very tight supply-and-demand balance for the current crop year that ends in August. “Soybean supplies are very tight which implies further price rationing may still be needed,” Francl said.

Rest of Article Here:
http://www.fb.org/index.php?fuseaction=newsroom.newsfocus&year=2009&file=nr0630.html
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The SkunK sees two good things in this article. First of all, with an increase in the ethanol percentage from 10% to 12, 13 or even 15%, ethanol demand will remain high and cover increased corn supplies. This in an increasingly healthy, expanding ethanol industry.

Second, with soybeans in short supply, the price of soy oil will remain high - and unless diesel prices skyrocket - it will remain inefficient to create biodiesel with soy. The pressure for corn oil extraction to achieve biodiesel mandates - and provide a workable feedstock for the biodiesel industry should therefore increase.

One more important note about corn production. With higher corn prices over the last couple years, many farmers have found it possible to invest in irrigation. I am not talking about the desert here. Many places where corn grows just fine without irrigation. But supplemental irrigation provides consistency in dry years and increased yields in even normal years. The corn is sure to get water "exactly" when it needs it. My point is this additional capital investment will lead to increased yields and supply that are in addition to the overall acreage planted.

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Thanks to Todd Neeley's article and his lead on this topic. Note his comment about whether we go to 12, 13 or 15% from the present 10% ethanol mix:
http://www.dtnprogressivefarmer.com/dtnag/common/link.do?symbolicName=/ag/blogs/template1&blogHandle=ethanol&blogEntryId=8a82c0bc22179937012237114e3801ab

Good Luck to Investors,

SkunK