Drought. It's a word that both corn farmers and ethanol producers fear. At press time, farmers in North Dakota, South Dakota, areas of Iowa and other parts of the nation were struggling with hot, dry conditions that threatened yields.
In the long term, however, the industry has watched corn yields trend higher over the course of years and decades. In many respects, the ethanol industry's near-term, non-cellulosic future depends on rising—or at least sustained—corn yields over the next eight to 10 years. The question many are now asking is, "Can this upward trend be maintained in the face of unforeseen, uncontrollable and downright unsuitable weather conditions?" Climatologists point to the possibility of a widespread drought, overall drier conditions and greater variability in rainfall—and that could hit corn and ethanol, hard.
Could it be enough to stop the rapidly expanding ethanol industry in its tracks? Probably not.
Using hundreds of years of data, Iowa State University extension climatologist Elwynn Taylor is able to see clear, long-term patterns emerge. The average person typically doesn't even realize these cycles exist, and yet large-scale weather patterns, which can span decades, have repeated themselves over and over for millennia. In other words, he tells EPM, scientist have good reason to believe periods of extreme dry or wet weather are, as he puts it, "a regular thing."
Patterns Indicate that Dry Conditions Loom Taylor uses those patterns to make some weather predictions that impact corn yields, among other things. One of his models specifically predicts the likelihood of a major drought in the next few years; another indicates the nation is at the beginning of a 30-year stretch of generally dry conditions. In particular, the weather patterns Taylor talks about impact the center of continents, which in the United States would directly impact the midwest and, more alarmingly, the Corn Belt, which supplies a large portion of ethanol production feedstock.
The data comes from examining the growth rings of trees. Those records show that, on average, a widespread drought has hit the country about every 17 years for several hundred years. There are some variations to this pattern, with a harsh drought sometimes falling in the 15th or 18th year. In 800 years, however, the time interval has never been longer than 23 years, Taylor tells EPM.
This is significant because the most recent widespread drought to hit the country was in 1988. Based on this, Taylor predicts a major drought will likely hit the United States sometime within the next five years. "If we go past this next five years, we'll be setting a new record for the number of years between major droughts," he says, adding that drought conditions are defined by both moisture and temperature, not precipitation alone.
On top of that, it's likely there will be less rainfall than usual over the next three decades, give or take several years either way. For hundreds of years, the weather has followed a pattern of 30 years of overall wet conditions and 30 years of generally dry conditions, Taylor says. As with other weather patterns, the number of years isn't exact but varies between 30 to 40 years. "Nature doesn't read the book," he quips.
Taylor's prediction looks at weather patterns on a large scale. It looks at the big picture over a timeframe of decades. That means, for example, that during a 30-year period of dry conditions, significant stretches of wet weather—even flooding—could occur. However, the broader cycle will prove to be drier than normal.
The exact year of the shift from wet to dry conditions cannot be pinpointed until more time has passed. "History may show that [the pattern] changed right around the year 2000 and began the dry," Taylor says.
During the wet period, which approximately spanned the past 30 years, increased moisture had a positive effect on some crop production. That helped corn production expand outside the traditional Corn Belt. Taylor has a striking prediction about what's going to happen now. "Pretty soon we'll see the Corn Belt move back to the Corn Belt," he says, adding that at a minimum, the dry conditions will increase corn production costs.
On the other hand, Dev Niyogi, an Indiana climatologist at Purdue University, considers the local effect of climate change a more dominant player than the large-scale effect. "It is still unclear, really, what is going to be the tendency of drought in the Midwest in the coming years," he tells EPM.
Temperature changes are causing increasing variability in rainfall patterns. That could lead to things such as more intense storms, an increased number of storms, longer lag time between storms and more. "Whether that translates into drought or not is completely unknown," Niyogi says.
Experts say increasing urbanization is one of the reasons for what may be a changing climate in the Midwest. Changing land use causes weather circulation changes, which are known to trigger thunderstorms. An urban area, with more paved surfaces, stores more heat and has higher temperatures than an agricultural area, Niyogi explains. An agricultural region, with better evaporative cooling, can experience temperatures that are 2 to 20 degrees Celsius lower than those in urban areas.
Niyogi's overall prognosis is that the agricultural community needs to brace itself for increased weather sensitivity. Under current conditions, weather can have up to a 20 percent effect on total crop yield. With increased variability of rainfall, that number could go as high as 40 percent to 50 percent, he tells EPM.
Tough Conditions Call for Tough Crops Seed companies have been researching and developing technologies to help corn survive in a drought. Whether it's enough to shore up the U.S. corn crop in drought depends on how severe the drought is, experts say.
For both Monsanto Co. and Pioneer Hi-Bred International Inc., drought tolerance is a high-priority issue. Achieving desirable corn yields is the ultimate objective of farmers, and drought, of course, can interfere with that goal.
Monsanto, a more than 100-year-old company, has a long history of helping growers battle weeds, pests and weather, partly by creating favorable crop traits, according to Tami Craig Schilling, a spokeswoman for the agri-giant. In the late 1990s, the company began buying seed breeding businesses around the world and cataloging all the different gene information it collected. Using marker-assisted breeding technology, the company works to identify the corn varieties, among other crops, that tolerate drought better in terms of greater yield, Craig Schilling tells EPM. Out of that came a hybrid corn plant with a parent plant from Mexico, she says. The result is one example of how the company works to make hybrids that naturally tolerate drought better. All the breeding in the world, however, won't make a plant perfect. "If you don't get any rain in the summer, you aren't going to have a crop," she tells EPM. "But it can stay a little longer in the field with a little less rain and still give you some crop."
On the horizon is Monsanto's drought-tolerant corn developed through biotechnology. While it won't be available until the end of the decade or longer, this technology will give corn a boost, allowing it to grow and produce grain with less rainfall. "The expectation is that it will expand the corn planting acres in the United States," Graig Schilling says.
Pioneer Hi-Bred International is another company working to improve seed technology for crops such as corn. The company works in methods for natural breeding, as well as transgenic and molecular breeding, according to Joe Keaschall, the company's corn research director.
Pioneer Hi-Bred International has been working on the issue of drought tolerance for more than 50 years. Along with better farm management practices, advances in seed technology have helped expand yield dramatically over the years. "I would say we've added 50 to 100 bushels per acre to what was possible 50 years ago under drought," Keaschall tells EPM.
So if a widespread drought were to hit today, the corn industry wouldn't be nearly as hard hit as it would have been, say, 30 years ago. Keaschall also stressed, however, that it's not enough to make corn invincible. "If you have zero water, you get zero yield," he says.
Helping corn survive and produce grain during droughty conditions isn't just about how a plant responds to water. Both Monsanto and Pioneer Hi-Bred International have developed technologies to protect corn from insects that thrive in dry conditions—attacking corn crops when they are most vulnerable. Rootworm is a plant that costs $1 billion yearly in damages and costs to control it, Craig Schilling says. Rootworm larva eat corn roots, cutting off or slowing the plant's access to moisture.
Corn borer is another pest that attacks corn during dry periods, although not as severe as rootworm. The corn borer insect tunnels through the stalk of the plant, she says. To fight these two pests, Monsanto developed YieldGard Rootworm and YieldGard Corn Borer, two trademarked technologies that help protect corn crops. Farmers can select corn seed with one or both traits embedded in the seed. It works when rootworm and corn borer try to eat the corn. "They take a bite, they ingest it … it penetrates the lining of the stomach and basically perforates the gut of the [larva or corn borer], and it can't eat anymore," Craig Schilling tells EPM.
Developing rootworm and corn borer resistance is also an area where Pioneer Hi-Bred International has done work. The company takes a multiple approach to tackling the problem of drought, says Marc Albertsen, research director. "When it comes to drought tolerance, there's just multiple ways to get there," he says.
High Prices Don't Worry All Even with the very real possibility of drought, Matt Roberts, an extension agricultural economist for Ohio State University, doesn't see a long-term corn supply crisis for the ethanol industry. As more plants are built, the market will ration corn, funneling it into ethanol facilities because the industry is better situated to handle higher prices.
Still, as long as petroleum prices remain high, the ethanol industry's profitability will hold in the face of higher corn prices, Roberts says. "They would not be at the point where stopping production would be rational," he says.
With a substantial reduction in corn yield and higher prices, the livestock industry would likely tighten its corn belt first by cutting its corn-feeding practices, Roberts says. Greater demand domestically will also mean less corn will likely be exported. "That's not necessarily a bad thing because it's local demand that's consuming it," he says.
Out of the three markets, exports are the most elastic, followed by the livestock market, according to Paul Bertels, director of biotechnology and economic analysis for the National Corn Growers Association. Currently, ethanol is the least elastic corn market because most ethanol producers aren't currently set up to use other grain feedstocks like sorghum or wheat. "That's not to say that they can't," Bertels tells EPM. "They just haven't."
Theoretically, as Taylor predicts, if there was a widespread drought, the corn industry could see some contraction along the outskirts of the new Corn Belt, Bertels says. However, that won't necessarily hurt ethanol producers.
The impact of a drought on the marketplace will depend on how severe it is and when it hits, says Iowa State University economist Bob Wisner. Surplus supply of corn would help lessen the blow if drought were to hit this growing season.
However, if it happens in the next one to two years, that surplus will likely be used up. During drought in 1995 and 1996, U.S. corn yield fell about 10 percent below trend, Wisner tells EPM. That, coupled with unusual levels of demand from China, pushed prices above $5 for about six months. "I wouldn't rule out that kind of market reaction again [at least for a time] … if we were to have a drought out two to three years," Wisner says.
Under current ethanol prices, ethanol production facilities could tolerate substantial increases in corn prices, agrees Doug Tiffany, research fellow in the University of Minnesota Department of Applied Economics. The possibility of drought is an issue he does worry about, though. If prices get too high, it could be bad news for the growing industry. "Corn prices could completely choke off profits for those plants," Tiffany tells EPM.
Not everyone sees it that way, however, and some industry leaders aren't the least bit discouraged by the prospect of higher-priced corn. At the 2006 International Fuel Ethanol Workshop & Expo (FEW), for example, Delta-T Corp. CEO Bibb Swain said high corn prices caused by such things as increased demand, drought and the like could lead to more U.S. corn acreage. "Guarantee the farmer $3.50 a bushel, and watch how much corn you can grow," Swain told the FEW audience in Milwaukee, Wis.
Swain said Delta-T projects U.S. corn-based ethanol production to grow to approximately 15 billion gallons per year. Using current ethanol conversion figures—roughly 2.7 gallons per bushel—15 billion gallons per year would require about half of America's current corn crop. "We don't see that happening without the price of corn going up severely," Swain said, before suggesting that higher corn prices would be a good thing. "One of the reasons I came into this industry was to try get the price of corn up. We haven't done that yet. Look around. Corn is priced lower now than it was when I came into this industry back in the late '70s, so I personally look forward to driving the cost of corn up. That may mean ethanol production will become less profitable, but the corn farmer deserves a reasonable return on his investment. So I am telling you that if we ever start to see $3.50 corn on a regular basis, I believe you're going to start seeing a lot of corn that you didn't know was there." EP
Holly Jessen is an Ethanol Producer Magazine staff writer. Reach her at hjessen@bbibiofuels
.com or (701) 746-8385.
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