This spring, Peoria-area farmers were able to plant corn and soybean seed in a timely manner, as the bulk of the planting occurred during a four-week timeframe between April 15th and May 15th. It was a good start to the five-month growing season.
Illinois farmers are coming off a record corn crop last year, when average corn yields in Peoria, Tazewell and Woodford counties were 208 bushels, 224 bushels and 217 bushels respectively. Statewide, the average corn yield in Illinois was 200 bushels per acre in 2014—up 22 bushels an acre from the year before—the first time we have reached the 200-bushel mark for an average.
So… where is all of this corn destined to go? Some will be exported to other countries and a little will be processed and used as ingredients in grocery products, but the majority of corn will be used to feed poultry, pigs and cows, and for ethanol production.
With our 14 billion bushels of corn production in 2014, approximately five billion will be used in the ethanol-making process. This market is significant for farmers, especially in the Midwest, where a majority of the ethanol processing plants are located.
On May 29th, the Environmental Protection Agency announced the long-awaited, proposed renewable fuel volume requirements under the Renewable Fuel Standard (RFS) program. The proposals are for the years 2014 to 2016. (Yes, we were still waiting in May of 2015 for the 2014 standards.) RFS mandates a stated volume obligation (measured in gallons) of renewable fuel such as ethanol, which is made from corn, and biodiesel processed from soybeans.
The EPA announcement for corn ethanol was 13.25 gallons in 2014, 13.45 gallons in 2015, and 14 billion gallons in 2016. These numbers were approximately one billion gallons less each year from what Congress had set. Farmers and the agriculture industry would like to have seen a bigger chunk of our record corn supply go to ethanol production, but nonetheless, ethanol consumption is still a major player in the market for corn.
Soybeans are used to make a diesel fuel product called biodiesel. The initial proposal from the EPA for biodiesel production would have held it flat at the 2013 standard of 1.28 billion gallons. The new proposal calls for steady growth in biomass-based diesel, from 1.63 billion gallons to 1.90 billion gallons—a good increase of more than 600 million gallons.
U.S. consumers are the big beneficiaries of the current scenario. With record corn production, corn prices have been driven down from $6 a bushel to $3.50 a bushel during the past three years, and cheaper corn inputs should equate to cheaper products for consumers. A second plus for consumers is that the U.S. production of fuel by the oil industry has increased dramatically, with the fracking industry opening up in recent years. In fact, the U.S. is exporting a significant amount of energy products. A third benefit is that our vehicles have become much more fuel-efficient, and we are using less gasoline.
In 2007, motor gasoline consumption in the U.S. was around 140 billion gallons each year. At that time, the forecasted U.S. gasoline consumption for 2014 was approximately 155 billion gallons. In reality, the 2014 motor gasoline consumption was closer to 135 billion gallons. The end result: agriculture and the oil industry are producing more fuel and consumers are using less… hence, fuel prices have come down significantly.
Our agriculture sector needs the fuel market to utilize our abundant corn and soybean supplies. Corn and soybeans are renewable, clean-burning, and benefit our economy. This year is shaping up to be another good year for corn and soybean production. iBi