Agricultural News

North central Iowa farmers, co-ops ready for production boom
By RANDY MUDGETT- Managing Editor

FORT DODGE — The year 2004 was a great year to grow corn and viewed as one of the worst ever to store corn outside. Consequently, as farmers trend toward higher yields continues, the need for more on-farm and off-farm storage rises as well.

One local cooperative has decided to include more grain handling and storage to its base by adding several new storage facilities. NEW Co-op, based in Fort Dodge, is in the process of building two new grain bins at its Otho site holding 1.35 million bushels of grain, one bin in Rands that will hold 300,000 bushels, one in Palmer that will store 675,000 bushels plus constructing a cement wall storage facility in Knoke. Brent Bunte, general manager of NEW Co-op, said the co-op will store 3.1 million bushels more this year than last year.

‘‘We piled about 7 million bushels on the ground last fall and never got it all cleaned up and moved out until January,’’ Bunte said. ‘‘The bigger crop has caused us to store grain on the ground.’’

Besides adding more storage, Bunte said the Otho site will add a commercial grain dryer and the Bode NEW Co-op will also be updated and will add a grain dryer.

Another grain handler who is also adding storage is West Central Co-op. Based in Ralston, the local cooperative is building at least one new steel storage facility in Gowrie, a site only several miles away from a new ethanol plant slated for startup next year. West Central’s new storage at Gowrie will hold 700,000 bushels.

Does storage pay?
According to recent Iowa State University Extension studies, adding grain storage on the farm is not profitable for farmers. Given the cost of steel and the lack of reward in the grain markets to coax producers to add storage on the farm, experts say the farm cost to add storage would be roughly $1.50 per bushel.

‘‘Farmers shouldn’t even consider adding storage,’’ said Kelvin Leibold, an Iowa State University Extension farm management specialist. ‘‘I am not sure what the storage price would be for a large bin, but the basis and the carry in the market would suggest farmers should not consider adding more storage on the farm at this date in time.’’

The one consideration co-ops may be deciding to add new storage now in north central Iowa is likely directly linked to an expansion of new ethanol plants in the area. Considering that VeraSun Fort Dodge LLC will use 40 million bushels of corn annually plus an additional 20 million bushels consumed by Frontier Ethanol near Gowrie, the local co-ops may be used as a holding area for corn. Further, Webster County corn growers will be unable to raise as much corn as the two plants can consume.

Leibold said the basis (price difference between local prices and Chicago Board of Trade prices) is likely to improve in the area.

‘‘Webster County could become one of the islands in Iowa that pays more for corn,’’ Leibold said. ‘‘Right now, we have several of these islands in the state but right now north central Iowa has one of the widest basis markets in the major Corn Belt.’’

The biggest corn producing county in Iowa (Kossuth County) has the widest basis markets in Iowa as most of the corn produced their must be shipped out via rail or truck. And, most of all of north central Iowa has the next highest basis averages.

‘‘There has been a lot of discussion and questions coming from farmers on how ethanol will affect price in the coming years,’’ Leibold said. ‘‘Right now, there is too much corn in Iowa and the ethanol plants do not have to pay a huge premium to get corn.’’

However, with the current increases in fuel prices, ethanol plants may be hard pressed to jump great distances away to source corn.

Leibold said, ‘‘It usually costs about 5 cents a bushel to have corn shipped to you from the next county and twice as much if you ship from two counties away. But, with fuel prices higher than last year, that price may now be 7 cents to 8 cents a bushel if you jump a county away for your grain. The basis will improve next to these plants but how much is yet to be determined. Once all the plants get up and running, then we can judge better how this market will trend and, if indeed Webster County becomes one of those islands I talked about.’’

April 18, 2005, Corn Basis

"North central Iowa farmers, co-ops ready for production boom"
By RANDY MUDGETT- Managing Editor

Farm News - A Messenger Publication Serving farmers in Northwest and North Central Iowa
Vol. 11, No. 9
Friday, April 22, 2005
pgs. 1 & 2
website: www.farmnews-iowa.com