DM&E Expansion and the farm economy

[nanaimo73]

 And thus begins the problem with ethanol.  As more people use it the price will rise.  I wonder if it will rise to the point where it prices itself right out of the market?

In that case the goverment should subsidize farmers to switch to corn rather than subsidize farmers to grow weaker crops. Is this being done already ?

[solzrules]

Yes, corn prices are moving upward.  There is a forecast of even higher 07 prices as demand will probably outstrip supply, based on the ethanol plants on line and new ones coming on line.  This year's production of corn is about 11billion bushels and next year's demand is forecast at 12 billion.

Good times in store for our ag friends.

ed

And thus begins the problem with ethanol.  As more people use it the price will rise.  I wonder if it will rise to the point where it prices itself right out of the market?

 

[Anonymous]

Interesting that you posted this now.

Just today I was shocked to see 50# sacks of shelled and cracked corn approximately double what they were last year at this time. Of course, that was at a farmers co-op  elevator right in the middle of grow land, so the transportation costs were on me, since I was picking up.

Pretty funny because the guy selling it to me was crying the blues like it was totally out of his hands, blaming it on wall street.

And after picking up I got to thinking about why he would be at anyone else's mercy, price wise.

If anything I'll bet he was crying all the way to the bank.

Said a lot of farms around the area that hadn't planted corn in years, were seriously considering it for next year.

[MP173]

Yes, corn prices are moving upward.  There is a forecast of even higher 07 prices as demand will probably outstrip supply, based on the ethanol plants on line and new ones coming on line.  This year's production of corn is about 11billion bushels and next year's demand is forecast at 12 billion.

Good times in store for our ag friends.

ed

[Anonymous]

USDA: DM&E Upgrade Could Save $240 Million
Friday November 3, 12:28 pm ET

SIOUX FALLS, S.D., Nov. 3 /PRNewswire/ -- The following is being issued by GOTRAC:

National, Minnesota & South Dakota agriculture leaders praised a study conducted by the US Department of Agriculture showing that the proposed Dakota, Minnesota & Eastern (DM&E) Railroad upgrade and expansion could lead to $240 million a year in budget savings as a result of better corn prices and lower farm payments.

According to the report, the added competition, efficiencies and access to markets offered by the DM&E Railroad upgrade would lead to lower transportation rates for producers, improving their bottom line. As a result of lower costs and better grain prices, payments from two federal farm programs could be reduced by $240 million a year on corn raised in Minnesota and South Dakota alone. USDA considered savings to two programs for corn production: Counter-Cyclical Payments and Market Assistance Payments.

A copy of the report can be accessed at http://www.gotrac.org/usdareport.

"USDA has provided yet another reason why the DM&E upgrade and loan makes sense for taxpayers," said Rick Tolman, CEO of the National Corn Growers Association, St. Louis, MO. "The benefits to farmers and rural economies have been clear from the start. This adds to the factual case for making this project a reality. We appreciate USDA's analysis and consideration and hope this helps bring the loan to approval soon."

Additional savings could be realized through reduced payments on other crops such as wheat and soybeans, and by considering other states in the region, such as Iowa.

"This study establishes a floor for how much can be saved from farm programs," said Reid Jensen, President of the South Dakota Corn Growers Association, Burbank, SD. "If you factor in crops like soybeans and wheat, you could see even more savings. The federal railroad loan program is there for a project like the DM&E upgrade -- projects that build more transportation capacity. In the end, it will save taxpayers hundreds of millions of dollars."

"The positive economic impact of the rail upgrade alone makes the case for the loan," said Randy Rieke of the Southern Grainbelt Shippers Association of Minnesota, New Ulm, Minn. "USDA's study now shows the DM&E rail upgrade and loan simply make sense. Southern Minnesota is hungry for competition, eager for opportunity and ready to grow with this project in place."

The DM&E has applied for a $2.3 billion loan through the Federal Railroad Administration's (FRA) $35 billion Railroad Rehabilitation and Improvement Financing (RRIF) program. The RRIF loan will be fully secured by the assets of the DM&E and will only be made if it can be repaid with interest. The Congressional Budget Office has established that the RRIF program does not have a budgetary impact, in part because the program is self-funded through fees paid by participating railroads.

The DM&E Railroad's upgrade project will rebuild 600 miles of existing DM&E track and add 260 new miles of main line construction to low-sulfur coal mines in the Powder River Basin of Wyoming.

Approximately two-thirds of the $6 billion project will be privately funded. The project would create an estimated 10,000 direct and indirect jobs. The DM&E plans to begin construction in 2007 and to be operational by 2010. DM&E has negotiated community partnership agreements with 55 of the 56 communities on the line, addressing quality of life, traffic and safety needs.

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PS.  Corn prices hit a ten-year high this month.