I wonder if the railroads will be able to handle the transportation when harvest time comes. Additionally, since this new product will not travel over the same routes corn was shipped when it was to be used for food; instead it will be heading to the new ethanol plants.
From the above quoted article:
With corn prices soaring due to the demand for ethanol, the US is looking at what may be its largest corn planting since World War II, according to US Department of Agriculture statistics. Some 90.5 million acres are expected to be planted - 15 percent more than in 2006…
…Still, there are downsides. The prospect of so much corn is already starting to push prices down, there’s an environmental risk to planting more marginal land with such a fertilizer-intensive crop, and many farmers aren’t quite sure where they’ll store it all come harvest time.
“With that big a crop coming at us, we’re going to have some storage problems, we’re going to have some transportation problems, we’ll have a little bit of everything coming at us,” says Dan Zwicker, a market analyst with the Illinois Farm Bureau.
The storage issue may be a bigger one than transportation. Several years ago, many local elevators had to store their receipts (not sure if it was corn or soybeans) in the open because they didn’t have enough space. I also remember in the late 1970s that several older US Steel ore boats were bare-boat chartered to serve as floating grain elevators. About three or four were tied up at Lake Calumet Harbor for this purpose.
I agree, storage capacity will be the biggest problem. Here is a picture of what happens when there is a bumper crop (not even related to ethonal), and besides ethonal isn’t going to cause the US to max out its corn production overnight. Bumper crops will continue to cause more problems than a gradual increase in demand.
In the S.D., MN, and Iowa area, it’s very common for the ethanol plants to be in the middle of major corn producing areas. Much of that corn would be shipped in by truck.
As Murphy noted, the new ethanol plants are being sited so that they are a short truck haul from the farm. Very little corn will be moved by rail to an individual plant.
The outgoing transportation of the ethanol, however, is a much different story. The ethanol is long haul in tankers either on the road or rail because the current pipeline system is not suitable for the product. Rail should have a distinct advantage with this product.
After the brewing process is completed, the leftover mash is still valuable as an animal feed. At present it is mostly utilized locally, but it could become a source of additional carloadings. Disappointedly, from the animal’s point of view, you do not end up with “happy” cows, pigs and chickens. [:D]
The downside to all of this is that the demand for export corn is likely to dry up as prices increase. The shipment of grain to either a port or a riverside elevator is an important market for midwestern railroads.
HHMMM, maybe the GOV. will stop paying farmers NOT to grow crops. Unfortunantly, most(OK, only quite a bit) of our best farmland is now housing developments, oh well. Who cares if Russia has the best, and most expansive farmland in the world now. All they need is people to farm it! OH, that’s already happening with Europeans buying property. When do WE wake up?