Category Archives: Iowa

Remarkable Graphs of Corn & Soybean Profitability


Blue blocks: Profitable time periods. Note that I’ve altered the graph by adding red and blue blocks to show profitable years vs. profit-loss years. Source: Ag Cycles: A Crop Marketing Perspective By Chad Hart/Iowa State.

The remarkable graph above, showing corn profitability since 1972, says it all.

The article in which the graph is embedded, by Iowa Ag economist Chad Hart, begins like this… “Over the past seven years, corn and soybean producers in the United States have enjoyed their best run of returns in history.”

Hmmmm. Let me think. What happened about seven years ago?

After that he explains that profitability is cyclical in a competitive industry such as commodity farming, and that “economic theory indicates the long-run profitability of a competitive industry is zero.”

Hart says, “When we examine the average return to a bushel of Iowa corn over the entire time period from 1972 to 2012, it is a positive 5 cents per bushel. However, if you looked at 1972 to 2011, the average return was negative.” !!!

He then warns of a near-term downward cycle of lower commodity and farmland prices.

It’s already happened. Corn prices have fallen. This year’s producers who are renting land that is priced according to yesterday’s profits, may see a tough bottom line.

Unfortunately, from there on out in this paper, Hart goes off on economist tangents about interest rates and input costs during recessions that aren’t as relevant as what I see as the biggest story when one talks about an over-produced commodity crop, which is policy. Furthermore, policy is what has driven down exports and feed demand for corn in recent years.

If we were dealing with a commodity that feeds the world’s growing populations, like Jim Rogers always tells investors, the price of corn would go up because of natural, growing demand. Instead, we’ve had overproduction of corn for decades on end, and it feeds agribusiness, not the world’s growing populations. The Energy Independence and Security Act of 2007 created a new and rapid demand for this input-heavy crop, rewarding the producer, the machinery maker, the fertilizer, seed, and chemical companies. Policies have supported corn growing both on the demand side, and through direct payment programs and crop insurance.

If we really wanted food and energy security, we’d promote fuel efficient vehicles instead of Chevy Tahoes and F350s that burn E85, and we’d preserve our soil, waterways, biodiversity, and aquifers so that future generations have healthy land on which to grow food.

Corn and soybean production in America today is mostly all about policy.


Also interesting is the same information on soybean profitability as viewed on the following graph:

Source: Ag Cycles: A Crop Marketing Perspective By Chad Hart/Iowa State.

We can generalize that soybeans have, on average, had more profitable years than corn. They have enjoyed a boost in price, too, as a consequence of ethanol’s recent, large demand for corn. Plus, around 15 percent of our nation’s soybean crop is going to produce biodiesel these days.


SOURCE: Ag Cycles: A Crop Marketing Perspective

3 Picks: Ogallala Aquifer, Biofortified Millet, Agriculture Students

Below, are today’s three chosen agricultural-related news picks.

1) Kansas State Study on Ogallala Aquifer Use: “If current irrigation trends continue, 69 percent of the groundwater stored in the High Plains Aquifer of Kansas will be depleted in 50 years. But immediately reducing water use could extend the aquifer’s lifetime and increase net agricultural production through the year 2110. Those findings are part of a recently published study by David Steward, professor of civil engineering, and colleagues at Kansas State University. The study investigates the future availability of groundwater in the High Plains Aquifer—also called the Ogallala Aquifer—and how reducing use would affect cattle and crops.”

2) Scientists Deploy Iron-Rich Pearl Millet Against Malnutrition: “Iron-rich pearl millet is being conventionally bred by ICRISAT as part of the HarvestPlus program, which seeks to develop and disseminate staple food crops rich in micronutrients to improve nutrition and public health. One recently released variety, ICTP8203Fe, commonly known as Dhanshakti (meaning prosperity and strength), is now being cultivated by more than 30,000 farmers in Maharashtra. It is the first biofortified crop cultivar to be officially released and adopted by farmers in India.”

3) Iowa State sees largest enrollment in the College of Agriculture: “Expectations are high in the College of Agriculture and Life Sciences(CALS) this year, with the college anticipating approximately 4,000 undergraduate students for the fall of 2013. The past two years have trumped the last undergraduate enrollment record set back in the fall of 1977, which had 3,623. … For the past 15 years, the employment rate of agriculture and life sciences graduates has been at or near 98 percent, acting as a driving force behind the record numbers in enrollment.”

This news post was written and compiled by K. McDonald.

3 Picks: DIY Verticle Garden, Microgrids, E85 Nonsense

Photo credit: The Dirt

Below, are today’s three chosen agricultural-related news picks.

1) A DIY Verticle Urban Garden Using 2-liter Pop Bottles: Phil Stamper posted instructions on how to make a hanging bottle garden. This is a verticle urban garden system that anybody can do with some rope and empty pop bottles. It comes from the Brazilian design firm, Rosenbaum, and it was such a hit that they released these instructions so that they are available to everyone. (Please go to the source to view the instructions.)

2) ENERGY: Is the Future Micro-Grids? “One of the most under-reported stories in the U.S. energy industry today is Connecticut’s ambitious electricity pilot project—one that could have a widespread ripple effect across the country. On July 24, state government officials announced plans for nine micro-grid projects as part of a Micro-grid Pilot Program aimed at ensuring electricity grid resilience and reliability during severe weather events. “Micro-grids” are essentially small-scale electricity generation and distribution systems that integrate various distributed energy resources and can be managed locally and, if necessary, independently from the main grid. Diesel-powered micro-grids are common in the rural areas of many developing countries such as Haiti, Indonesia, and the Philippines, and some military bases, telecommunications bases, and Internet server farms have done the same, in order to ensure a steady flow of power even if a natural disaster or terrorist attack should take down the main grid. … “

3) How much E85 would be consumed if we gave it away? That is my question for Bruce Babcock (of Colbert Report fame) at Iowa State, who suggests that we need an economic incentive to get past the ethanol blend wall by having E85 available at more stations and by reducing its price in a piece titled, “Price It and They Will Buy: How E85 Can Break the Blend Wall”. (Pretty sure I was not his intended audience.) He says, “The resulting demand curve for ethanol above the E10 blend wall suggests E85 consumption of about one billion gallons if E85 were priced to generate a six percent reduction in fuel costs. If the price were lowered further to generate a 15 percent reduction then about two billion gallons could be consumed, and a 30 percent reduction would be needed to induce three billion gallons of consumption. … rather than being a physical barrier to increased ethanol consumption, the E10 blend wall is an economic barrier that can be overcome by increasing the incentive for drivers to use E85 to fuel their vehicles.” K.M.: Or, maybe it would help if you labeled it what it really is. Hardly anyone is aware of the fact that the ASTM lowered the minimum requirement of ethanol in E85 to 51 percent “E51″ in early 2012… “to ensure that ethanol fuel blends for flex-fuel vehicles can meet seasonal vapor pressure requirements in all regions of the country.” Next up, I’d like to see reports from Babcock on 1) the non-mandated use amounts of E85 in our top five corn producing states, 2) the average ethanol blend produced under the E85 label today, 3) who will be paying for the 30 percent price discount of E85 in his proposal and what will that cost? 4) how do your cost discount incentives for selling E85 compare to energy content in the product? and, 5) How much would your economic incentives contribute to the problems of water quality, habitat and soil loss in your state of Iowa?

(Note that the EPA has recently indicated that it will reduce targets in 2014 to address “blend wall” concerns, and, the anti-ethanol sentiments and voices are heating up in Washington, on TV ads, and elsewhere.)

This news post was written and compiled by K. McDonald.