Farmers in California and Arizona with parched wallets are eyeing a dangling carrot that could lead to improved grower incomes for those willing to produce specific feed grains to meet the insatiable needs of the nation's exploding ethanol industry.
In the West, grower opportunities range from planting flexible corn hybrids that yield high quality silage for dairies as well as corn for ethanol - to foregoing cotton production for corn and grain sorghum.
Monsanto Seeds System Manager Bill Cox of Visalia, Calif., said California corn for silage growers are seriously weighing their options due to lower silage prices in recent years versus escalating corn prices.
“On the scale of one to 10, I'd say the grower interest out there is between 5 and 6,” Cox said. “Growers are very serious about growing a hybrid that yields great silage plus corn for ethanol as well. California corn growers have typically grown about 75 to 80 percent of the crop for silage and the remaining 20 percent for grain.” He said some corn varieties currently on the market can grow both while some cannot.
For cotton growers contemplating the switch to feed grains, prices dictate the rationale. March '07 corn futures on the Chicago Board of Trade topped $3.74 a bushel on Dec. 1.
In 2004, corn prices were in the dismal $2 range. The price run-up is largely tied to the rush to grow corn, grain sorghum (milo), and other crops to fuel an estimated 100 ethanol plants already in production in the United States. An estimated 35 more plants are under construction.
What price level could push Western cotton growers to make the change to feed grains?
“To switch away from cotton, $7 per hundredweight for sorghum gets growers' attention, which is about where sorghum prices are right now. $10 per hundredweight could be the breaking point,” said Mike Ottman, feed grains specialist with the University of Arizona. “I can imagine cotton growers having a mix (cotton and feed grains) but to fully give up cotton is hard to imagine,” he said. Ottman pointed to the huge capital investment cotton farmers have in planters and pickers.
Yielding Arizona cotton acres to feed grains is the goal of John Skelley, president and general manager of Pinal Energy LLC. The company is constructing the first ethanol plant in Arizona, a $62 million facility located near Maricopa about 30 miles southwest of Phoenix.
With fuel production scheduled to begin in May 2007, the plant will produce 52 million gallons of ethanol annually. The 18 million bushels of corn required annually to run the plant will initially be railed in from the Midwest. Pinal Energy will purchase the corn from its sister company, Arizona Grain. The corn will arrive weekly on a 100-car shuttle train. Down the road Skelley wants locally grown grain to fuel the plant.
“In five years, Arizona will be producing more acres of feed grains (corn and milo) than cotton,” predicted Skelley during a renewable fuels discussion at the Arizona Farm Bureau annual meeting in November in Phoenix.
Skelley is offering jobs to Arizona farmers to switch from cotton to corn and milo to fuel the plant. The facility will “suck grain like a big vacuum cleaner,” noted Skelley, using 50,000 bushels per day. He wants local production.
“This is for real. If you're a grower out there, we want to talk to you about growing product for this plant because it gobbles up the grain,” he said. “We want to sell you distiller's grain if you're a dairy, and we want to buy corn or milo from you if you're a farmer. We're there to be your customer and for you to be our customer.”
He plans to sell the plant's bi-product, distiller's grain, to dairies and feedlots within a 30-40 mile radius.
As expected, the Arizona Cotton Growers Association (ACGA) was far from enthusiastic over Skelley's plans.
ACGA Executive Director Rick Lavis said, “If he can pay my (cotton) growers enough, fine - good luck.” Lavis said Arizona cotton acreage in 1980 covered 631,000 acres compared to 295,000 in 2001. Cotton acreage in 2006 was 206,000 acres.
“The amount of acreage reflects that cotton prices have not been high enough. The price is roughly 54 cents per pound right now,” he said. “It takes 32 cents to 75 cents to grow it. You do the math.”
Lavis noted the ethanol industry is being pushed to the point of saturation with more plants in production than the corn to sustain them.
Outside of price, could other Arizona factors such as limited water supplies impact a switch from cotton to feed grains? Cotton grower Kevin Rogers of Mesa, Ariz., said milo could work in Central Arizona but would require double cropping possibly with barley. Water used for a double crop would run about the same for cotton so water in the crop conversion would not be a major factor. Rogers serves as an ACGA vice-president.
“Unless the cotton market turns around, growers including myself will be looking at options to pay the bills. I am not one to put all my eggs in one basket,” Rogers emphasized. “We've grown milo off and on over the years. If the milo price was over $9 per hundredweight, I'd find a couple of hundred acres and give it a shot.”
Wet distiller's grain (DDG) is the leftover corn product once the starch is removed through the ethanol process. The DDG is usually fed to dairy and beef cattle, poultry and swine because its high digestibility, energy and higher fat content can yield higher milk production than soybean and canola meal.
While alfalfa is a critical mainstay in the animal's diet, could a sudden large supply of DDG on the market replace alfalfa? No, said Ottman. “Alfalfa is unique. It's hard to duplicate its ruminant function.”
In fact, he said higher grain prices tend to push up alfalfa prices. “Alfalfa prices usually follow feed grain price increases,” he said. “Higher feed grain prices may be more of a positive effect for alfalfa than a negative.”
Arizona Forage Producers Association President Lee Banning of Laveen, Ariz., grows alfalfa near Gila Bend, Ariz., and opposes a local ethanol plant in the planning stages. Ethanol West LLC and Western Milling LLC plan to break ground on the plant in 2007. But Banning doesn't want the plant in his backyard.
“I don't want to compete against them for labor,” said Banning. “Labor supplies are very tight. If you throw 50 more (ethanol) jobs in the area, it will drive up everyone's cost of labor.”
Skelley is seeking legislation to expand Arizona's current six-month mandated use of fuel containing 90 percent gasoline and 10 percent ethanol blend to the entire year. He called E85, the blend of 85 percent ethanol and 15 percent gasoline, the future of the industry, as more new cars and trucks coming on the market can burn the higher ethanol blend.
“With E85, you'll have the choice of buying fuel that came from Venezuela or from Maricopa, Arizona. We think you'll prefer Maricopa,” Skelley proclaimed.
He acknowledged that E85 generates 10 percent to 15 percent less mileage because of fewer generated BTUs (British thermal units). “I suspect it will be priced accordingly.” He praised ethanol as a cleaner burning fuel with fewer tail pipe emissions.