Three inches of snow in mid-October gave Ron Obermoeller an unexpected break. The Brewster, Minn., farmer was just three days into the corn harvest when he spoke with EPM—and he was eager to get back to work. "It melted off, so we're just kind of getting going again," Obermoeller says . "It's a good harvest. [The corn is] ready to go. It would just be nice to have it out." Although the snow slowed harvest progress, Obermoeller couldn't complain too much, especially after his corn crop pulled through a hot, dry summer. "We went through the month of August basically with no rain around here," he says. 
 
 Not surprisingly, one of the biggest issues for corn growers in 2006 was the weather. With 100-degree temperatures, and little or no rain, in some parts of the Corn Belt through much of August, the conditions leading up to this year's harvest weren't exactly ideal. "I was just in South Dakota over the weekend, and I was very taken aback at how devastating it was," says Rick Tolman of the National Corn Growers Association (NCGA). "Its one thing to read about [the drought], and it's another to see it."
 
 In terms of the total U.S. crop, however, the corn sector was able to maintain its trend line because other areas of the country produced a better-than-average harvest, thus evening out the losses.
 
 From a national perspective, 3 million fewer acres of corn were planted this year than in the previous year, yet growers still managed to reap the third-largest crop on record. The latest numbers from the USDA indicate returns of 152 bushels per acre, which is average in terms of yield. An average crop wouldn't normally cause any consternation. However, a bigger crop would have tempered the increased demand for corn in 2006, which was fueled by the growing ethanol industry. "It would have been nice to be around 11.8 (billion bushels of corn) instead of 10.9," Tolman says, referring to total U.S. production. "States that had drought could have helped to make up that difference." In November, the USDA lowered its 2006 corn production estimate to 10.7 billion bushels.
 
 Although the 2006 corn crop was less than stellar, Tolman believes it was a great year for ethanol and the farmers who supply the industry with corn. "Ethanol is here, and it's real," he says. "It's not a pipe dream anymore. I think we are going to look back on 2006 and see it as a major transition year for the ethanol industry and corn has had a lot to do with that."

 
 Keeping the Crop Moving 
 Water is critical to corn in more ways than one. It's essential to its cultivation, but it also provides the medium by which the crop is transported via barge and ship to both domestic and foreign markets. One of the more heavy lobbying efforts of the NCGA this year was pushing the Water Resources Development Act (WRDA), thereby unleashing the means to repair the lock and dam systems on the Mississippi and Illinois rivers. "This is a battle we've been fighting for 10 years—trying to get those locks and dams updated," Tolman says, explaining that the bill was handedly passed in the House but stalled in the Senate this year. "We do have a commitment to get it brought up in the lame duck session, so we're still hanging on to that. If not, we have to start all over again next year." 
 
 In terms of a timetable, construction could start on one of the locks in 2010, but it would be 10 to 15 years before the first dams scheduled for updates would be completed. The engineering and construction scope of the project is massive. "It's kind of hard to get excited about it when our grandkids might not see the benefits because it's going to take so long to rebuild them," Obermoeller says, adding that a project with such a far-off realization prompts people to start thinking of ways to use more corn domestically. 
 
 The cost of shipping corn increases when the river is impassable, which in turn increases demand for truck and rail carriers. "When one is out of whack, there's not the competitive pressure to keep the others in line," Tolman explains. This was evident when river traffic was halted by Hurricane Katrina and, subsequently, rail and truck rates shot up. When river traffic is shut down, it also gums up the whole transportation system. "Storage facilities were backed up all the way to the farm level, and they had few options, or no options, in terms of how to move their grain," Tolman says. With 80 percent of the nation's corn crop headed for the export market via the Mississippi River, it's important to keep corn moving in an efficient and timely manner. 
 
 Although the export demand for corn has grown, domestic use has increased at an even faster pace to keep up with the bourgeoning ethanol industry. "For the first time in the 2006-'07 corn marketing year, corn used in ethanol is expected to equal the amount of corn exported," USDA Chief Economist Keith Collins said in a report to the U.S. Senate Committee on Environment and Public Works in September. "This rapid increase in the share of corn production used in ethanol highlights two key issues: as more corn supplies ethanol plants, rising corn prices and increased corn acreage will have implications for other agricultural commodity markets and because the supply of corn is relatively small compared with the U.S. gasoline demand, other domestic sources of renewable and alternative energy must be developed to replace petroleum-based fuels if the United States is to reduce its dependence on imported oil." 
 
 Obermoeller likes the fact that more corn is staying in the United States, but he doesn't believe the export market in his home state mirrors that of the rest of the nation. Although ethanol production has grown exponentially in Minnesota, corn exports continue to increase faster than local demand. In the 1990s when Minnesota first started producing ethanol, growers in the state exported about 45 percent of their corn, which has since grown to 60 percent, Obermoeller says. "My personal preference is to process the grain here and export the products [like oils, ethanol and distillers grains] we get out of it … ," Obermoeller says. "Maybe we've been living and dying on exports for too long. It's good to have domestic markets fighting for their share of the corn crop again."
 That said, export markets are expected to stay strong in the near-term due to tight grain supplies worldwide. 
 
 Monitoring Trade Talks

 Between keeping track of domestic corn production and lobbying for upgrades in river transportation, Tolman was keeping an eye on the international trade scene. The Doha round of the World Trade Organization negotiations didn't live up to the hopes or expectations of some. When 170 countries need to come to an agreement, it doesn't come easy. "There was a big breakdown," Tolman says. Agriculture is a major focal point of the negotiations because almost every country in the world is involved in some form of agricultural trade. Because of that, agriculture is sometimes the linchpin for reaching agreements in other sectors. 
 
 For the United States, there are three pillars for constructing a successful policy for future world trade: eliminating all export subsidies, removing trade-distorting domestic support and lowering tariffs to allow more market access. "The U.S has very low tariffs so we didn't have much to give on the market access issue," Tolman says. "We didn't see that other countries were willing to lower their tariffs, enough to justify the significant reductions in our domestic support." 
 
 There were quite a few countries—strictly the second- and third-world countries—that weren't willing to give any market access, or price reductions, yet wanted very significant access to U.S. markets. So, there was a falling out amidst heavy pressure to get something done, and quickly. "It's like a typical poker game where people are trying to bluff and see who will give and who won't, and who will be the last man standing," Tolman says. There is some behind-the-scenes talking going on, which some believe may be more productive because it's out of the view of the press. "When people get under the political spotlight, they tend to take much more of a hard line and are less compromising. So I am re-enthused that we will get some kind of a commitment or agreement, and it's looking a little bit better than it did earlier this summer." 
 
 Countries need to decrease their domestic support of subsidies that are linked to crop production, Tolman says. In turn, support of the agricultural sector would be conducted in such a way that doesn't stimulate the production of certain crops that are not in demand. "If you do need to support your farmers, do it in a way that is non trade-distorting," Tolman says.
 
 Nicholas Zeman is an Ethanol Producer Magazine staff writer. He can be reached at <a href=mailto:"nzeman@bbibiofuels.com">nzeman@bbibiofuels.com</a> or (701) 746-8385.

Through the Water Resource Development Act, which the NCGA is hoping will pass-through congress, locks and dams on the Mississippi and Illinois rivers will receive much-needed updates.

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Export markets for corn are expected to stay strong near-term do to tight grain supplies worldwide.

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U.S. corn growers produced the third-largest crop on record in 2006 despite drought conditions in some major production areas. When not focused on production, growers and industry leaders turned their attention to rebuilding the lock system on the Mississippi River and tracking the Doha round of the World Trade Organization discussions.

From Harvest to Transport to Trade

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