Swallowing the Frog

by Doug Rich (High Plains/Midwest Ag Journal) The best statement made about the current market situation for grains at the Kansas Commodity Classic came from Chris Novak, CEO of the National Corn Growers Association. Novak said if you eat a live frog first thing every morning, it can only get better from there. That pretty much sums up the grain market right now—it can only get better from here.

Holaday (Darrell Holaday, market analyst with Country Futures) told producers at the Kansas Commodity Classic to get over the mentality that they are the only ones in the world that can grow corn because they are not. The Black Sea region is poised to become the largest exporter of corn in the world. The United States is not a major player in the world wheat market anymore, controlling less than 10 percent of the market. There is international competition for all of the grain markets.

“The market does not care what your cost of production is, just look at the crude oil industry today,” Holaday said. “Don’t assume that prices can’t for lower. It will go beyond equilibrium. The market will stay irrational longer than you can stay liquid.”

“We have seen this before,” Novak said. “Buckle down, cut costs and work with your banker to restructure debt. The market will come back.”

NCGA has developed a new strategic plan that is looking for ways to build demand in a supply driven market. Increasing ethanol production is one way to build demand for the corn crop.

“We are competing with an old industry that controls the end of the pump,” Novak said. “They control consumer access to the type fuel they put in their vehicles. ... "

“Setting up mandates in other countries is the key,” Dwyer said. “Without mandates there is no ethanol industry. I think the ethanol market outside the United States and Brazil is ripe for the picking.”

Dwyer said we don’t sell a lot of meat or feed grains to India but it has potential as a market for ethanol. The new transportation minister in India wants to take the country to an E-20 blend for ethanol. They are currently stuck at E-3.

“If they set up their policies, then can quickly get to an E-10 blend,” Dwyer said.

“If you develop a demand for ethanol anywhere in the world the most competitive supplier today and in the near future is going to be the United States,” Dwyer said.

Chris Novak said cities in India, China and across Asia are looking for ways to improve their air quality. Ethanol could be part of the solution. READ MORE and MORE (Ethanol Producer Magazine)