How High Fuel Prices Affect Corn Prices

Energy prices and the cost of food show what it really costs this harvest.

Every truckload of corn that Gary Woodley drives to the elevator this fall is good news for consumers of corn-based food and fuel, but every mile Woodley drives is costing him more.

Producing more corn means a better income for farmers and a plentiful supply of grain for consumers, but today's high fuel prices are steadily increasing the cost of supplying corn and eating away at corn grower margins.

"We're like every other American consumer," says Woodley, who raises corn and soybeans near Clarion, Iowa. "If we're going to move our crop to market, we have to pay for the fuel. We're always looking for ways to be more energy efficient and get some control on our energy needs."

Energy costs add up quickly at harvest

Energy costs can add up quickly for farmers during harvest. For Iowa's 12.9 million acres of corn, just running the combines could mean $81 million alone in fuel costs this season.

In recent years, consolidation among grain elevators has increased how far farmers drive to deliver their crop. Once there may have been several grain elevators in a county; today there's often only one. For a grower with a 15 mile trip one way, that's about $20 worth of diesel for every 900 bushels of corn.

Unfortunately, the costs don't end at the elevator. There Woodley's corn and thousands of other bushels are loaded onto unit trains of 52 cars or more. Rail shipment from a loading point like Council Bluffs to the feed yards in Texas or to the Mexico border for export can cost from 90 cents to more than a dollar for every bushel.

Using river shipping is cheaper way to go

Transportation by barge is a more economical choice for much of the corn bound for export. A gallon of diesel will move a metric ton of corn (39.4 bushels) about 117 miles by semi or 228 miles by rail. Put the corn aboard a barge, and one gallon will move it almost 300 miles.

"Using the river system is better, but it is far from perfect," says Dean Taylor, a Prairie City farmer and an ICGA director who follows transportation issues. "We run into delays because our river infrastructure is out-of-date and inefficient, which ultimately costs time and money."

If fact, the latest government study shows barge delays on the Mississippi and Illinois Rivers add $72.6 million per year to the cost of shipping goods by water – that's $72.6 million that customers pay in the end.

Finally, for most U.S. corn exports, there's the energy used for ocean shipping. Earlier this year, it cost more than $1.50 per bushel to pay ocean freight rates from New Orleans to markets like Egypt and Morocco.

High energy costs make transportation costly

"Our customers want quality, affordable grain," says Woodley. "Farmers need a reasonable price to stay in business. When high energy costs make transportation expensive, it can push up the price beyond what the market can support."

When transportation costs go up, foreign customers can end up spending more to move their corn purchases than they pay for the corn itself. "High fuel and transportation costs are bad news for us and bad news for our customers," says Woodley. "This harvest season, Iowa Corn is focused on maintaining an efficient transportation system and extending our renewable fuel supply."

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish