Well, at least don’t blame it entirely on corn, said Dr. Mark Welch, Texas AgriLife Extension Service grains marketing economist in College Station.
True, the cost of producing ethanol has been driven up for a number of reasons, including a higher cost of corn, but there are other factors that have a bigger effect on the price consumers see at the gasoline pump, Welch said.
“Certainly ethanol is a contributing factor; the markets are linked, obviously,” Welch said. “But to drive the price of crude oil, there are so many other things going on, such as uncertainty over global economic growth and that impact on oil demand and the value of the dollar. In the case of ethanol, that we’re only blending 10 percent gives you some idea of the magnitude of the change.”
There’s no argument that corn prices are relatively high and the failure of a large amount of the Texas crop was a factor, he said. On an average year, Texas farmers harvest about 200 million bushels, but current crop projections are about half of that. And though not affected by drought, as the Texas crop was, Corn Belt yields this year were “disappointing.”
“We still don’t have a firm handle on what the crop size nationwide is going to be. But we do know that the ending stocks are going to remain very, very tight in the corn market,” Welch said. “Tight supplies put an upward pressure on corn prices, which is putting a squeeze on the profit margins of ethanol producers.”
If ethanol margins are tight, then there is not an incentive to increase ethanol production, which will keep production down and prices relatively high, he said.Welch noted that it was understandable why some may look to ethanol markets as the culprit for higher gasoline prices. Crude prices have been very stable over the last few weeks, while ethanol markets have been stronger in the last few weeks.
“Ethanol markets and crude oil markets do not necessarily move in tandem,” he said. “Though linked, they do have particular supply and demand dynamics.
“I personally would not attribute what is happening to the price of gasoline today to what is happening in the ethanol market. All of these markets, energy and grains, have high degrees of volatility separately, too much so to blame price action in one simply on the other. There are too many other factors going on.”
More information on the current Texas drought and wildfire alerts can be found on the AgriLife Extension Agricultural Drought Task Force website at http://agrilife.tamu.edu/drought/ .
AgriLife Extension district reporters compiled the following summaries:
Central: The region received some rain, but pastures continued to show severe drought stress and were slow to recover. The rain did not put much water in stock tanks, so water was still a problem for livestock producers, who continued to cull cattle. Some producers were planting small grains. Cotton was slow to mature.
Coastal Bend: Rain from the previous week began to green up some pastures, but with shorter days and cooler temperatures, grass growth was slow. Producers continued to provide supplemental feed to livestock and cull herds. Matagorda County reported the second-crop rice harvest was going well. Wharton County reported some hay was harvested after the recent rainfall. With dry conditions overall, many producers were opting out of planting winter or pasture crops this year.
East: Some areas received as much as 2.5 inches of rain. Others, Marion County, (no comma) for example, remained dry. The rain slightly improved soil-moisture levels. Some Cherokee County producers planted winter pastures. Hay supplies were extremely low. Producers continued to purchase hay from other states. They also continued culling herds. Reports of feral hog damage increased. Many armyworm infestations were reported.
Far West: There was no rain, and extreme drought conditions continued. Burn bans remained in effect. A cold front did lower daytime temperatures, but high winds produced a severe dust storm that some compared to the dust storms of the 1950s. Presidio County had its first freeze on Oct. 19. The cotton harvest was ongoing, with most fields producing far below normal yields. Alfalfa producers were taking final cuttings. Pecan shuck separation was in full swing for Western and Wichita varieties. The earlier maturing Pawnee pecans were harvested. Area ranchers continued to reduce their herds due to the short supply of hay and, in some counties, lack of livestock water as well. Pastures and rangeland grasses were dormant or dead.
North: Even after rains the previous week, soil-moisture levels remained very short to short. Rangeland and pastures remained in poor to very poor condition. However, the rains did raise soil moisture enough to encourage producers to continue to plant small grains and winter annual pastures. Depending upon the county, wheat was from 26 percent to 70 percent planted and 5 percent to 50 percent emerged. Oats were 26 percent to 70 percent planted. The AgriLife Extension agent in Titus County reported a “tremendous influx of ‘junk’ being sold as hay.” Stock pond water levels remained critical in many areas. The rains did reduce the danger of wildfire.
Panhandle: The weather was warm and windy for most of the region with no moisture reported. Some counties reported their first freeze. Soil-moisture levels ranged from very short to adequate, with most counties reporting very short to short. The corn and cotton harvests were ongoing. Wheat growers continued planting wheat. Most dryland wheat may not make a stand. All irrigated wheat was being watered to get it established. Rangeland and pastures were mostly rated very poor. Livestock producers continued supplemental feeding of cattle.
Rolling Plains: Recent showers greened things up somewhat, but cooler nighttime temperatures slowed grass growth. Producers were sowing wheat and oats. Some cotton producers delayed harvest to take advantage of the moisture and plant wheat. Some wheat fields that were earlier sowed into dry fields emerged and were up and appeared to be in good condition. The peanut harvest was up and running, but quality was down. Pecans began to fall, but nuts were small and of poor quality. Pastures and rangeland remained in very poor shape going into the winter. Cool-season grasses began to emerge but needed more moisture for growth. Many cattle producers partially liquidated herds due to the high cost of hay and the lack of water.
South: Short to very short soil moisture conditions were the rule for the region except for adequate levels reported in Atascosa and Live Oak counties. Pastures greened up where there was substantial rain, but forage growth was slowed by cooler nighttime temperatures. In McMullen County, buffle grasses were doing well because of recent rains, but native grasses were slow to respond. In Webb County, some livestock producers were searching for hay for the winter, while others have completely sold off their herds or were in the process of doing so. In Atascosa and Frio counties, the peanut harvest began, and the planting of wheat and oats planting was ongoing. In Live Oak County, producers were planting more triticale, (a hybrid of wheat and rye) than oats. Maverick County farmers continued planting winter crops. In Zavala County, spinach and cabbage were doing well, dryland oats and wheat-emergence got a boost from rain, and cotton ginning continued. Fall row crops were progressing well in the Starr County area.
South Plains: The cotton harvest was ongoing but yields were lower than expected from earlier projections. The corn harvest was winding down. Producers were planting winter wheat, hoping to get enough rain to bring it up. The region had much cooler temperatures with highs in the 70s and 80s and lows mostly in the 40s. A few places recorded dips into the 30s. Several reported what looked like a return to the Dust Bowl days. On Oct. 17, a rapidly moving cold front with gusts as high as 74 mph stirred up a “haboob,” which is Arabic for “intense dust storm.” The dust cloud was estimated to be 8,000 feet high, and blocking the sun for a few minutes, reducing visibility from less than a quarter mile to zero. About 3,300 homes in the Lubbock area lost power due to wind and blowing debris damaging power lines. A wildfire caused by the storm caused closure of Highway 84 near Post in Garza County for a time. Some open cotton was also blown out by the high winds, further decreasing yields.
Southeast: Light showers settled the dust but did not do much to reduce plant stress. More trees were dying. Many producers were planning to plant winter annuals. Grasshoppers were feeding on what little bit of green vegetation was left. Cool conditions slowed pasture growth. The cotton harvesting was over, and farmers were preparing fields for next year’s crops.
Southwest: Light rains caused some greening up of vegetation, but drought conditions persisted. Producers continued to search for hay and to provide supplemental feed to livestock. Cotton modules were being hauled from fields to gins.
West Central: Days were warm while nights were cool. Rainfall from a few weeks ago improved soil-moisture levels enough that producers increased field activities, including plowing and planting crops for winter-forage production. They were planting small grains. Some were replanting dry-planted fields that had earlier failed. Rangeland and pastures showed some green-up after recent rains, but grass growth was not significant due to cooler temperatures. Stock ponds were in good condition from runoff after the rains. Livestock producers continued supplemental feeding of cattle.