‘They just don’t know if they are going to have a crop for the coming year’: Farmers reluctant to sell grain to ethanol plant during drought

Source: By KELO • Posted: Tuesday, July 20, 2021

ONIDA, S.D. (KELO)– Corn is the vital ingredient for producing ethanol. However, with drought conditions, ethanol plants are concerned about the lack of corn they will be receiving.

Ringneck Energy buys local corn and milo from the Onida area and processes it to make ethanol, dry and wet distiller grains and corn oil.

Kevin Kjorsvik, Commodities Manager, said they have seen farmers reluctant to sell their grain as the weather has gotten drier.

“They just don’t know if they are going to have a crop for the coming year,” Kjorsvik said. “That affects our prices that we have to pay for our corn, which is the most expensive ingredient that we have here at the plant.”

Local cattle producers also use the feed produced at the plant, both during the summer and the winter.

“So, they are really looking at how much hay do they have and what kind of distiller grains are going to be available and the price of them,” Kjorsvik said. “They have to crunch a lot of numbers to see where their costs are going to be for the next coming year for their business.”

They are seeing more local producers buying their wet distiller grains, he said, because it is a good feed source to blend with their forage. They saw a really good market for it late in the spring because the pastures weren’t really growing.

Cattle producers are also kind of “stock piling” feed because they see the current drought conditions and they want to make sure they have enough feed on hand.

Prices increased a lot last spring, more than they have over the summer, Kjorsvik said, as most of the corn belt has at least received adequate moisture, which has driven down the price of corn on the futures board.

Locally, however, the basis level have remained strong due to the drought conditions.

The amount of producers bringing corn to the plant per day has not necessarily gone down, he said.

“We have a certain amount of corn that we grind everyday, so we need to make sure that we get that in order for the plant to run and the plant to run efficiently,” Kjorsvik said. “But there is a question mark here before we get into our new crop, how much corn will be available to purchase in the local area.”

Not getting enough corn is something that is always in the back of Kjorsvik’s mind as a commodities buyer.

“You need to have corn in order to run, so we are always concerned about it,” Kjorsvik said. “We have received some rains here locally over the past couple weeks, so our crop is looking a little better in areas, so we remain hopeful that the area will be able to produce enough corn for us to run during the upcoming year.”

They may have to start looking at buying corn from farmers who are a little outside of the area, he said. It will be more expensive to get corn in that way.

“Ideally, we want to buy as much locally as we can, but if we need to, we will either rail some in or purchase corn further away from the plant in order to get enough for it to run,” Kjorsvik said.

In June, the corn looked pretty rough, he said, but since they got a little rain recently, the corn improved some. However, they will need to continue to receive timely rains in order for the corn to produce enough for the plant to run.