(Jamie) We’re back! Let’s join Duane and Mike as they discuss ethanol production.
(Duane) Duane Toews joining you once again with more AGam in Kansas. And while at the Commodity Classic held in Manhattan a chance to catch up with Mike Dwyer, Chief Economist with U.S. Grains Council. Mike, you had a chance to talk to growers here in Kansas about outlook if you will, and looking down the road on where those exports are going to come from. Typically U.S. Grains Council thought about exporting grains. An awful lot of your talk looked at some of those value added products that may be the future. (Mike) Yes, first off I think two years ago the Grains Council became the Market Development Cooperator for Ethanol. This is not an animal feed product, it’s in a whole different sector. It’s energy. So we just started. They hired me. I have a background in ethanol from USDA. I have been doing that for about eight years. Yes, we’re starting to ramp that up now because for us the whole issue is grain in all forms. Whether we export grains as an unprocessed product or as a DGD or as ethanol or meat, the beneficiaries are the farmers who grow the corn here or the grain here in the U.S. So, we see probably a brighter future, or at least USDA does for the value added products over the next few years than a lot of raw commodity. It’s kind of tough. We have a lot more competition today in corn and the grains in general, but our DDG’s have found good going world wide, been accepted by many of our buyers around the world. It’s a value added product. Beef, pork and poultry have done very well, but keep in mind a pound of beef, pork and poultry go out the door it’s taking corn with it. You still get the benefit. Now ethanol. Ethanol, for every…we have about 7 million tons of corn that went out the door as liquid corn this year. It’s what I referred to as ethanol is liquid corn. Seven million tons is a lot. That’s about one-seventh of what we export in direct corn and we’re just getting started. We’re just getting started. (Duane) We think about those opportunities. A lot of folks have talked about middle class households ramping up and not just in some of those developing countries, but countries that are likely to have the opportunity to spend those dollars on something. (Mike) That’s right. Everyone talks about the rising middle class around the world, but what they’re talking about is the rising middle class in developing countries, places like China, India, Southeast Asia, Latin America. One of the first things middle class households that have moved from subsistence households to middle class do is they eat meat, they improve their diet. Second of all they start buying cars. And when you need cars, you need fuel. That’s a great inflection point for us because we’ll convince them to do it in an environmentally friendly way by blending ethanol. Most countries will want to produce their own ethanol but if they can’t hit their targets with domestic production, we want them to be able to import including from the United States. We have a great competitive product. We’re selling about 40 cents a gallon discount to resilient ethanol and if we can get access to markets we should do very, very well in terms of selling our product there. (Duane) Mike, we think about a lot of folks have referenced, we don’t have to have all the market we just want our share and making sure we get that is kind of the U.S. Grains Council’s job. (Mike) That’s right. It’s about creating demand and we try to differentiate as best we can why our product may be different from our competitors, but in a commodity business that’s always tough to do. It’s not as if we have competitors that are lame. Brazil, Argentina, Ukraine are very, very good exporters of corn. They found a pretty good niche. Their market share is rising. But in the area of ethanol, it’s a little bit different. Ethanol in the United States, we have a superior business model in our opinion-sugar cane ethanol. We have all these co-products that come out of it. The Grain Council has already developed markets for the co-products now what we have to do is turn our intention to the main product, which is ethanol. (Duane) Our thanks to Mike Dwyer with the U.S. Grains Council joining us at the Kansas Commodity Classic in Manhattan. Jamie we’ll send it back to you.
(Jamie) Thanks, Duane. Next up is this week’s Kansas Soybean Update.