The futures price of corn is known globally, but the cash price is always a moving target, reflecting local supply and demand. And with the ascension of ethanol refiners as the number two consumer of corn, those refineries add significant dynamics to regional corn prices. But do those corn price spheres around ethanol plants offer similar prices to corn growers, or is there a price variation? If there is, how much is that variation and where are the farmers who benefit the most?
Prices paid for corn to make ethanol vary significantly according to the findings of Kansas State University economists Daniel O’Brien and Mike Woolverton. Their report reflects prices for corn around the Cornbelt since October of 2006, with much of that time spent in periods of volatility as the ethanol demand substantially increased. The study looked at prices in Illinois, Indiana, Iowa, Minnesota, Nebraska, and South Dakota where prices spent 2007 in the $3 to $4 per bushel range, peaked at $7 per bushel in June of 2008, and have returned to the $3-$4 range. The multi-state region averaged $3.96 per bushel, but ranged from $6.93 per bushel to $2.40 per bushel during the 167 weeks that prices were analyzed.
For Indiana, prices averaged about $0.16 per bushel higher than the regional average with the average cash price at $4.12. Illinois corn prices generally trended higher than the regional average, but cash prices were not available for the initial year of the study for unstated reasons. Nevertheless, the average cash price for corn was $4.36 per bushel, and that was the same for Indiana during an identical time period.
Eastern Iowa prices were also higher than other states, but varied from $0.10 to $0.15 per bushel below the regional average to $0.10 to $0.20 above the regional average. Those Eastern Iowa prices averaged $3.93 per bushel.
Western Iowa corn prices were also higher than the regional average, and were tallied at $3.92 per bushel. Southern Minnesota cash corn prices consistently averaged $0.10 per bushel lower than the multi-state region, but with what the economists called “a fair amount of variability around the trend.” The average was $3.84 per bushel.
Nebraska cash corn prices were about $0.10 per bushel lower than the regional average.
South Dakota cash corn prices were similar to Nebraska, and averaged about $0.20 per bushel lower than the regional average. The economists speculate, “The downward trends in relative cash prices for Nebraska and South Dakota may be due to somewhat more competitive or tighter corn supply‐demand conditions than in other parts of the U.S. Corn Belt.”
Central Kansas prices have a level average about $0.10 above the regional average, but it has a lesser focus on livestock than western Kansas, where the relative corn price has ranged from $0.25 over the regional average to $0.12 below the average. The economists say such a trend indicates a sharp increase in competition for corn supplies.
The economists conclude that corn prices in Illinois and Iowa have increased in comparison to the region, while prices in Kansas, South Dakota, and Nebraska have declined in comparison. As a result they believe the development of the industry will have a part in reshaping the structure of agriculture for years to come.
Depending on competitive factors, such as livestock feeding or export markets, cash prices for corn vary significantly across the Cornbelt due to the increasing number of ethanol refineries that are being built. The average corn prices for many Cornbelt states can range from more than $0.20 above to more than $0.20 below the average price of cash corn for the region.
Source: the farm gate blog