Green Plains has strong third quarter

Omaha-based Green Plains Renewable Energy , the nation’s fourth largest ethanol producer, reports strong third quarter results.

Green Plains’ revenues were 957 million dollars in the quarter that ended September 30th, up 93 percent from the same period in 2010.  And net income was 12.4 million dollars, compared to 7.4 million for third quarter 2010.

Green Plains’ ethanol margin of 17 cents per gallon in the third quarter was down two cents from the same period last year, but a five cent improvement over the second quarter of this year. 

During a conference call announcing those results, Green Plains CEO Todd Becker said the ethanol outlook remains bright despite the expected loss of the ethanol blenders’ tax credit. 

One reason is the Renewable Fuels Standard, which will increase to 13.2 billion gallons in 2012. Becker says RFS2 provides a consistent base demand for ethanol and the industry must fight attempts to weaken it.

“Although we don’t believe any attempts to modify the RFS will be successful, we plan on defending it vigorously as it is the only significant piece of national energy policy that reduces our dependence on foreign oil today,” Becker says.

Other positives, Becker says, are strong export demand for U.S. ethanol, ethanol’s discount to gasoline and the potential growth of E15 sales in coming months.   

AUDIO: Green Plains CEO Todd Becker discusses ethanol’s “fundamentals” (1:51 MP3) 

Concerns for corn mold

Although 2011 presented many challenges this year, Purdue University plant pathologist Charles Woloshuk says wide-spread corn mold is not one of them.  Woloshuk says even though growers battled unfavorable weather conditions throughout the growing season ear rot isn’t a wide-spread problem this year and this year’s weather was extreme enough to alarm a lot of producers to be on the lookout for Aspergillus ear rot which produces aflatoxin and possibly Fusarium ear rot which thrives in warm weather.

He notes even with this year’s weather, it doesn’t appear that is a problem.  Woloshuk says the fall weather pattern has a lot to do with the potential for ear rot.  For example, if we get tropical storms, which keeps the moisture on the ears, slows down drying and allows these molds to continue and get worse, producing even more toxin.

But, he says once the ear has dried, production of any toxin will slow if it is present.   Farmers who are concerned about grain quality should be sure to store corn properly and to make sure grain is dry in storage. They also can have grain samples analyzed through Purdue’s Animal Disease Diagnostic Laboratory, http://www.addl.purdue.edu/ or 765-494-7440.

Having the conversation about agriculture

The list of challenges ahead of the agriculture industry is one that is growing.  From climate change, to carbon footprints and the task of feeding a growing population with less has left a lot of people trying to find a solution.  Jim Moseley, former Deputy Secretary of the USDA and co-chair of Agree says because of the shift away from the farm, the challenges facing the industry have changed.   He says there is now this increased questioning about nutritional, social, environmental and economic consequences of the present system that we did not have 10, 15 and 20 years ago.  Moseley says that has created quite the challenge for the system. 

Moseley was the keynote speaker at the Center for Food Integrity’s Food Summit.

USDA focused on Farm Bill must-haves

The head of the USDA Farm and Foreign Agricultural Service tells Brownfield the USDA’s stance on the next farm bill is something they want farmers and ranchers to be assured of.  Acting Under Secretary Michael Scuse says the three farm bill principles laid out earlier this week by US Ag Secretary Tom Vilsack are: maintaining a strong safety net, supporting ag research and conservation and promoting vibrant markets at home and abroad.

Scuse says the ag department understands the uncertainty that exists across the country, “There is a great deal of uncertainty in the agricultural community. Everyone knows what the deficit is and the issues with the deficit in the past few months and what could happen in the coming months to get the deficit under control.”

Scuse says they want to reassure farmers and ranchers that the Ag Department is providing Congress with the information it needs to craft a new farm bill, “We believe that a Farm Bill can be crafted and, again, take care of these three very important areas for farmers and ranchers.”

But along with the Super Committee’s involvement, this is a farm bill year like no other. Scuse says the process of getting to a 2012 farm bill will “undoubtedly be very interesting.”

AUDIO: Michael Scuse (8:00 min. mp3)

Some New Zealand dairy plants back on-line

Dairy producers on New Zealand’s north island are still dumping some milk. Gas supplies to the island were cut off when a leak was discovered in the main pipeline supplying the island on Monday night. Commercial users including 15 Fonterra dairy plants were shut down due to the lack of gas. An estimated 35 million liters (9.2 million gallons) of milk were dumped on Tuesday.

All but three of the plants were able to restart on Wednesday thanks to a smaller back-up pipeline. As a result, the co-op says it was able to collect and process about two-thirds of the milk in the area but another 11 million liters (2.9 million gallons) of milk were dumped Wednesday. By Thursday, that number was down to five million liters (1.3 million gallons) dumped.

The cooperative is advising farmers that the availability of gas remains limited and they may have to shut some of the plants down again. The pipeline management company says the main line will be back by the weekend.

This comes at a most inopportune time as milk production has been strong in New Zealand and plants were running full-out. The first question is how long will it take to get back to full capacity? Second question is how will this affect product availability? The third question; who is going to pay for the lost milk?

White-Nose Syndrome cause identified

Researchers at the University of Wisconsin-Madison say they have found the cause of White-Nose Syndrome in bats. It is estimated the fungus has killed over two million hibernating bats in more than 15 states and 2 Canadian provinces. Most susceptible has been the little brown bat however at least five other hibernating species have been affected by the fungus.

The U.W. scientists say the disease is caused by a fungus called “Geo-myces Destructans” which is common in Europe but was first discovered in the U.S. about five years ago.

Now that the source is known researchers will try to figure out how it kills bats and how to stop it. So far they know that hibernating bats infected with the fungus awake as often as every 3 to 4 days instead of the usual 10 to 20 days. About 90 percent of the bats die from starvation

Interest rate cut on large bank ag loans

The Federal Reserve Bank of Kansas City says larger banks (with portfolios of more than $25 Million) cut interest rates on non-real-estate loans in the third quarter, boosting farm lending. According to the Fed’s Agricultural Finance Data, national farm lending was flat and while small and medium-sized banks extended variable rates on less than half their loans, large banks, on average, cut interest rates to 3.6 percent during the third quarter.

The Fed says farm real estate loans made up the largest share of farm lending as national farmland values increased. Land prices grew more than 25 percent above last year’s levels with most states in the Corn Belt and Northern Plains reaching record high gains.

The fed says strong ag profits limited overall ag loan demand, however. Equipment and livestock loans fell below levels of a year ago.

The Fed’s Kansas City 10th District Bank serves seven states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri.

Outside markets fuel grain and oilseed gains

Soybeans were higher on fund and technical buying, along with spillover from the outside markets. The dollar was lower while the Dow and crude oil are up sharply after the European Union reached a debt deal. Past that – there was no real fresh news and while export shipments were good, weekly sales were lower than expected. Soybean meal and oil were higher as well, following the other commodities and shrugging off lower than expected export sales.

Corn was higher on technical and fund buying, in addition to spillover from the outside markets. However, there wasn’t much independent news for corn and commercial buying interest remains very light. Weekly export sales were below estimates and shipments were less than what’s needed weekly to meet USDA projections for the marketing year. Ethanol futures were higher. Morgan Stanley, via Dow Jones Newswires, projects 2011/12 Chinese corn exports by China at 4 million tons, up dramatically on the year due to increased feed demand. The Buenos Aires Grain Exchange reports 55% of Argentina’s corn crop is harvested, around 12% less than this time last year due to dry weather. The International Grains Council sees the 2011/12 global corn crop at 855 million tons, 3.5% above a year ago, with a record 63.8 million tons in Europe and substantial increases in South America and China.

The wheat complex was higher on technical and fund buying, along with spillover from the outside markets, especially the dollar. That said – there was no real fresh news for the complex and the overall fundamentals remain bearish. Weekly export sales were at the low end of estimates and shipments were below what’s needed to meet expectations. National Australia Bank estimates 2011/12 wheat production at 25.05 million tons, up from their last guess, but under ABARE’s most recent projection of 26.2 million tons. Ukraine reports 92% of their grain crop is harvested with the running total at 48.9 million tons.

Challenges to ag ahead

The challenges and realities of food choices is the focus of the 2011 Food Summit that kicked off in Chicago Tuesday.  The goal of the summit is to take an in-depth look at the key issues surrounding consumer food choices.  Dr. Jason Clay, Senior Vice-Preside of Market Transformations with the World Wildlife Fund kicked off the summit and told attendees that the challenge going forward is where and how we produce food.  Clay says if we don’t get those answers to those two questions right, we can turn out the lights and go home.  Because there won’t be anything left to talk about. 

Clay says demand is changing and in the next 40 years we have to produce as much food as we have in the last 8,000 years.  Here are some statistics Clay shares:

  •  We’ll have at least 2-3 billion more people by 2050. 
  • Their income will be at least 2.9X per capita
  • On average consumption will most likely double.
  • Consumption of animal protein is going to increase – primarily in developing countries.
  • 70 percent of people in 2050 will live in cities.

Clay says that is more people than are alive today.  The Center for Food Integrity’s Food Summit concluded on Wednesday.

Food price inflation could top five percent

Grocery store prices could top last year by as much as five percent, according to Ricky Volpe, a food price economist at the USDA.

“We are seeing a sharp increase in food prices,” said Volpe, in an interview provided by the USDA.

Until recently, Volpe projected a 3.5 percent to 4.5 percent jump. Specifically, Volpe says the late fruit harvest has resulted in expectations for fresh fruit prices to rise three to four-percent.

“This month, due to the late harvesting of a lot of fruit crops in California and in Florida, we’ve revised our forecast for the fresh fruit index upwards, and that was sort of a tipping point,” said Volpe. Additionally, beef prices could average as much as nine percent higher, and pork could be up 7.5 percent.

Volpe expects a break in 2012. Prices will continue to increase, but not at the same rate as this year.

“Right now we’re looking forward to a decrease in price inflation, for prices to start moving more how they have in the last twenty years, in a more historically normal rate,” said Volpe. “The all-food index is expected to increase 2.5 percent to 3.5 percent over 2011 levels, and food-at-home 3 percent to 4 percent.”

Volpe cautions that over the next 14 months, weather and economic factors could change that forecast quite a bit.