Tuesday, August 17, 2010

POET Ethanol Plant Powered by New Federal Subsidy

Late this fall bales of corn stover will pass by Laurens on their way to become cellulosic ethanol at the POET plant southeast of Emmetsburg. The bales will have come all the way from Carroll. Eighty-five farmers have signed four year contracts to provide the bales. Most are within thirty-five miles of Emmetsburg.

POET held a kick-off celebration on site Monday. Governor Culver spoke to the crowd of about one hundred. Researchers from Iowa State and Idaho National Laboratory discussed positive findings that support the dream of cellulosic ethanol.

But what really makes it happen is a new federal subsidy tucked into the 2008 farm bill called the biofuels crop assistance program. It pays $45/ton to farmers who supply corn stover for ethanol. With that incentive POET had no trouble finding a supply of stover for this fall. Some 56,000 acres are under contract.

Without the subsidy the cost of baling and hauling the stover and the cost of replacing the fertility that is removed from the field would eat up the full payment farmer's could command from an ethanol plant. No subsidy, no ethanol.

The POET plant expects to need six times as much stover in a few years. New opportunities to supply the plant may be available next fall.

For this year the plant prefers large square bales. Balers from Kansas and elsewhere are expected to help in this area this fall, according to Aaron Bloom of Albert City, a financial consultant with Ag Performance of Buffalo Center, Iowa.

POET has abandoned earlier plans to use corn cobs. They were unable to convince farmers to slow harvest and separate the cobs. Now they plan to buy "whatever comes out the back of the combine." Corn stalks are not as desirable as the leaf, husk, and cob mixture that can be wind-rowed by the combine and baled without additional chopping or raking. An eight row corn head is said to work perfectly. About one ton of desirable stover can be harvested from one acre of corn in this manner.

Saturday, August 14, 2010

ISU: Keep Farm Rent Steady

Prices for crops and crop inputs have stabilized. Farm rents should do the same, according to Iowa State University extension farm management specialist Tom Olsen, who spoke Friday in Emmetsburg. "Steady as you go," Olson said.

The big picture is still one of national recession with a lesser effect on agriculture. Changes to a one-year-old lease are not really needed, he said, "But maybe the rent should be down a little bit." If the lease was negotiated several years ago when prices were more volatile, big changes may be appropriate.

Current cash rent rates in the Laurens area average near $190/acre for high quality land, according to an ISU survey. Two-thirds of the farmland in this area is rented to tenants. Since the 1920s more than half of Iowa's land has been farmed by tenants.

Land values have risen 8% in the Midwest according to the Federal Reserve Ag Letter of May 2010, but the number of land sales in 2009 declined 25% compared to a year earlier. The main driver of high land prices is low interest rates (see photo below). "Keep your head down. Don't leverage two farms to buy a third farm," Olsen advised.

Farm rent agreements automatically renew on September 1 unless either tenant or landlord cancels the lease in writing. Now is the time to decide if changes are needed.

Olsen also suggested farmers learn to use on-line resources such as the Web Soil Survey and the ISU Ag Decision Maker. Olsen can be reached at tolsen@iastate.edu.