Husky Ethanol Plant Importing Corn

[charliep]

Just a couple of comments. Don't know if the above is true (just back from holidays in beautiful BC) but will assume it is.

Grain producers will never have a higher value than when you are pricing on an import basis- price somewhere else plus cost to get it here. Normally, we are priced on a export basis - price where the grain is used minus cost to get it there. Lots of other factors in western Canada like ability to deliver to export market/CWB delivery contracts but this is the normal market function.

Also highlights the challenges of filling the supply needs of a value added processor. Husky at Lloydminster's capacity is about 350,000 tonnes a year or for nice round numbers 1,000 tonnes per day (25 B trains if you like). The unit train is likely about 90,000 tonnes or enough to keep the ethanol plant running for about 3 months. From Husky's side, what would it take to source that kind of volume from farmers over the summer?

A final comment is do we really understand the grain needs and specific quality/variety needs of an ethanol plant? How good a fit is CWRS for ethanol production? What impact does protein have? Gluten? Grade factors like sprout and frost damage?

[TOM4CWB]

Dear Charlie,

I think you skipped a cog on how much a unit train holds!

@ 90t/car... times 100 cars... that is 9000t not 90,000t! 9 days supply... not 90 days!

[wd9]

That darn BC sun!

[charliep]

Thanks for the correction. Maybe explains why my golf scores were so bad.

[wilagro]

Face it you wheat farmers...Husky is going to keep on buying more corn UNLESS you lower your price to the point where you LOSE money.

Ain't free enterprise AND choice wonderful? You are screwed...Husky has turned the tables on you, at least for now.

Somehow, I didn't believe all of the glowing reports about how Husky was going to SUPPORT agriculture with their ethanol plant. Too bad, but so sad.

Solution: Best you can do is invest in CORN futures.

Hahahahahahahahahahahahahahahah

[charliep]

wilagro

Choice is good. You can sell to Husky (and domestic feeders) or you can sell to the CWB. Which one of these alternatives will put more money into your pocket today?

[BennyHin]

If i was in charge of Husky at Lloyd, I too would rather buy 100 cars at a time of US corn rather than to deal with the administration of paying local farmers on the basis of single truck unloads.


For example:

1 train equals 9000 tonnes. Husky cuts a single cheque. done.

versus buying wheat from local producers:

It would require approximately 260 trucks at an average unload weight of 35 tonnes each to match the unit train's unload.

Just think about it: If husky orders a unit train of 100 cars of corn from Iowa, they are guaranteed uniformity for the entire lot. If the corn doesnt meet contract specs, they send it back.

Whereas taking delivery from local farmers of red winter, prairie spring, western red, soft white wheat, etc, this will increase their admin costs, as well result in inefficiencies in the ethanol conversion process if the wheat quality is variable. I.e. Every truck is of different quality, and if it is raining or snowing, local farmers cannot deliver on time.

Unit trains are easier.

[ColevilleH2S]

I'm all for competition, and if they can import corn for less than my low Px Wheat all the power to them. I can find another market. But the numbers don't add up, I still don't see how relativly high priced corn plus frieght is cheaper than our discounted wheat. Is corn 30% more effient at coverting to ethanol than wheat is? Is CN charging them less to haul corn in than the $40tonne they charge us to haul wheat out? Can anyone confirm this story???

[ColevilleH2S]

Oh ya I forgot, Elevators in the corn belt don't load trains for free either. Tack on another $10/tonne for the corn.

[TOM4CWB]

Charlie,

Either way we look at this situation... this is a very GOOD NEWS Story for grain growers in western Canada!

I just read this:

"Skyrocketing demand for corn to feed those refineries has had two effects:

U.S. farmers this year planted more acres in corn than ever before, and corn prices are at record highs. For the first time in human history, the market price of a staple food crop is being determined by its value as a vehicle fuel rather than its value as something to eat.

Because the United States is a major exporter of corn to the world, rising corn prices here translate into increased food prices everywhere. That's the principal reason 75,000 people marched in Mexico City three months ago to protest tortilla prices, which have doubled in a year. Subsidized American corn production in the past artificially lowered global prices, driving many Mexican farmers off their land -- often to seek work illegally north of the border -- and now subsidized American fuel production threatens to deprive Mexico's poor of a dietary staple.

Americans are not immune. Because corn is a major component of poultry and livestock feed, rising corn prices mean higher meat, egg and dairy prices.

Corn derivatives also are in nearly every processed food product in a modern supermarket, so the ripples touch almost every meal.

According to a study issued last week by the Center for Agricultural and Rural Development at Iowa State University, ethanol-related price increases have added $14 billion annually to the nation's food bill already. The study also projects that the combination of high crude-oil prices and continued subsidies could boost ethanol production to more than 30 billion gallons a year by 2016, at which point it would consume half the U.S. corn crop and add $20 billion a year to the nation's food bill.

Most Americans can afford it; we spend a smaller percentage of our household income on food than anyone in the world. But we are not likely to make any friends in the global community if we force poor people elsewhere to endure empty bellies so we can keep our gas tanks full.

(Contact John Krist, opinion page columnist for the Ventura County Star, at jkrist@VenturaCountyStar.com.)"

People can pay a fair price for our grain... and eat our wheat!

I don't think this is a bad deal at all... the global economy is hummming along!

Not a bad transition at all from a year ago or so!

[Fransisco]

Vader there is nothing in this world that is more democratic than the free market.

Try living by your own words for a change instead of trying to steal the concept.

[padron]

Let me wade in on this discussion (as a newcomer).

Don't forget Husky has a supply agreement with AU. They committed to supply Husky with 100% of their feed wheat needs but are forcing Husky to move the price higher and higher without any risk on themselves. Supplies have become tight with higher quality wheat more the norm this past year. As a result Husky's supplies are uncertain.

The move to bring in a unit train of corn is quite predictable. It demonstrates they can if they want and it sets a ceiling. This likely costs them in several ways - higher input costs and some storage challenges as they are a "just in time" plant to name a couple. 9000 tonnes all at once is more than they want on hand. It really isn't simpler accounting as they get consolidated invoicing from AU now.

It's as much a cannon shot over AU's bow to get them to wake up. In the long run - if US corn is cheaper - they will keep bringing in supplies to keep their plant running but their preference is local wheat.