Friday June 7th Ag News

Beef Producers Asked to Take Online Survey

Kansas State University animal scientist Sandy Johnson is hoping beef cattle producers will take a little time from their day-to-day work to answer a few questions online in order to help her and other scientists understand how producers have integrated artificial insemination into their production system and how it contributes to the profitability of their operation.

The survey, conducted by Johnson and colleagues at several other land grant universities who make up the Beef Reproduction Task Force, will give animal scientists a better understanding of practices that beef producers use in conjunction with AI and synchronization of estrus. The team would like to hear from those who use AI for their own operation as well as those who provide AI services to others.

Take the survey https://online.ksu.edu/Survey/take/takeSurvey.do?offeringid=208705.

Most of the survey questions are simple to answer, said Johnson, who is a livestock specialist with K-State Research and Extension, based in Colby, Kan. Some of the questions will allow producers to share what they've learned using AI. Most people should be able to complete the survey in 10 to 20 minutes.

One respondent will receive 50 Estrotect Heat Detection Patches, she said.

The survey results will be available at www.beefrepro.info later this year.

More information about the Beef Reproduction Task Force is available at http://beefrepro.info. The task force includes animal scientists from K-State, University of Nebraska, Iowa State University, South Dakota State University, University of Florida, University of Illinois, University of Missouri and University of Idaho.



PQA Plus® Revisions Debut at World Pork Expo

Pork producers’ desire for continuous improvement in production practices and exceeding customers’ demands for quality assurance measures spurred changes to the voluntary Pork Quality Assurance® Plus (PQA Plus®) program. Revisions to PQA Plus were announced during World Pork Expo 2013. A part of the pork industry’s We Care initiative, PQA Plus provides a framework for significant, relevant food safety standards and improved animal well-being.

PQA Plus has evolved since its introduction in 1989 with regular revisions and updates to increase its effectiveness, incorporate new research information, and ensure the program’s validity with customers. PQA Plus incorporates 10 Good Production Practices to align more closely with the We Care initiative principles. Revisions to PQA Plus were effective June 7, 2013.

Farmers and other industry experts who have seen the revised program embrace the changes. "There are so many outside influences affecting how we do business, I think for any industry to come together and realize there needs to be a training tool to say, ‘These are our set industry practices and standards.’ and self-regulate is very positive," remarked Emily Erickson, animal well-being and quality assurance manager at New Fashion Pork in Minnesota. "PQA Plus represents a group coming together and determining what’s best for their industry. It’s hard to go wrong when a set of individuals are proactive and forward thinking in this way."

Jan Archer, a farmer from North Carolina, sees additional benefits to PQA Plus as well. "All of our employees are on same page, use the same vocabulary, and understand our common issues," she explained. "It’s a way for us to impress on our employees how important what they do every day is. We are all focused, pulling in the same direction. The end result is added credibility, according to Archer. "We are a contract farm. It’s important our integrator knows how hard we’re working," she said. "Participating in PQA Plus is demonstrating credibility."

The program also serves as a baseline for standard operating procedures in some instances. "We feel it’s an important program to help us ensure we’re doing the right thing and that we’re meeting our quality standards," Mike Faga, director of animal well-being at Iowa Select Farms stated. "It’s widely accepted by the packing community and the customers as well who buy our product."

In Brief: PQA Plus Enhancements
-    Participants must pass a test on questions related to 10 Good Production Practices with a minimum score.
-    Recertification will be available via an online process after initial certification.
-    Participating farms must submit a corrective action plan for all non-compliant findings following site assessments.
-    Trainers and Advisors for the program will receive more extensive instructions and information.

More information on the revised PQA Plus program is available at www.pork.org/certification.



National Pork Board Approves $450,000 in PEDV Research Funds

In less than three weeks since the positive identification of Porcine Epidemic Diarrhea Virus (PEDV) in the United States, the National Pork Board has approved $450,000 in Checkoff funds to help speed research into finding answers to this new disease threat facing the domestic pork industry. This amount, coupled with funds just approved by the Iowa Pork Producers Association's research committee, brings the current total devoted to PEDV research to $527,000 from the two producer-based organizations.

"The National Pork Board took this action to help get answers to U.S. producers as quickly as possible to help protect their herds from this devastating disease," said Conley Nelson, National Pork Board president and producer from Algona, Iowa. "Because of the investment producers make as part of Checkoff, we're able to respond quickly to sudden disease threats such as this."

According to Dr. Paul Sundberg, the Pork Checkoff's vice president of science and technology, PEDV is not a new virus outside of the United States nor a regulatory/reportable disease, but rather a production-related disease that hits young pigs under three weeks of age particularly hard. In the handful of states that have seen the disease, mortality rates have been high in pigs of this age, while older pigs that may get the virus typically recover.

"Since PEDV is widespread in many countries, it is not a trade-restricting disease," Sundberg said. "While PEDV may appear clinically to be the same as transmissible gastroenteritis (TGE) virus with acute diarrhea, producers who suspect their herd may be infected should work with their herd veterinarian immediately if any TGE-like symptoms appear. And, as always, they should maintain strict biosecurity protocols."

The objectives of the Pork Board's swine health committee, which will oversee the PEDV research, will be to get real answers about the spread and transmission of the disease, along with measures to detect, diagnose, prevent and control it. To help facilitate this, Sundberg said that the committee and Pork Checkoff's science and technology team will work closely with the key industry partners, such as the American Association of Swine Veterinarians, the National Pork Producers Council and state pork associations.

"As with all of our research, we want it to be transparent and objective," Conley said. "And in this case, it must be very specific with quick turnaround times so that we can get answers quickly."



New Pork Checkoff tools help producers evaluate, measure, benchmark

The Pork Checkoff today announced new and improved tools to assist pork producers in evaluating the financial impact of sow housing choices, improving workplace safety, reducing their environmental footprint and identifying problems within breeding stock.

Sow Housing Calculator
A new Sow Housing Calculator will assist producers in making important decisions about remodeling or other facility or management choices on the farm.

Created in the context of remodeling sow barns, this new calculator can also be used to model the financial impact of any management or facility choices to a sow farm, including:
· Changes in nutrition
· Changes in herd size
· Remodeling or replacing housing choices

Once the data is added, the calculator generates a report of the needed cash flow and cost per pig information that may be required by a lender.

"Pork producers have many options available to them, each with its own cost and benefit," says Chris Novak, National Pork Board CEO. "The new Sow Housing Calculator will help producers look at the facility and management choices that are best for them and the pigs in their care."

The Sow Housing Calculator is available free of charge to producers and can be found online at pork.org.

Benchmarking Workplace Safety
A new website to provide reliable methods of benchmarking workplace safety is being developed by the Pork Checkoff to track and compare workplace safety data across farm systems and between peer companies.

"You cannot improve what you cannot measure. This new benchmarking system will provide producers quantifiable indicators that will allow them to compare workplace safety on their farms with others in the industry. More importantly, producers can use this benchmarking tool to evaluate various actions that can reduce future accidents and injuries," Novak says. "With strong participation from the industry, we will be able to measure the improvements that we make over time as we work together to reduce the most common injuries on our hog farms."

"Our industry has adopted a set of ethical principle that includes our commitment to enhancing workplace safety for our families and employees. Improving workplace safety can reduce costs and improve performance, but most importantly, it is the right thing for us to do."

The Benchmarking Workplace Safety system will be available June 17 and may be accessed via pork.org.

Environmental Footprint Calculator
A second-generation environmental impact calculator is now available to producers. This new calculators expands the existing Live Swine Carbon Footprint Calculator by allowing producers to calculate their water footprint. The Pig Production Environmental Footprint Calculator version 2.0 is available by calling the Pork Checkoff Service Center at 800-456-7675.

National Swine Reproduction Guide
Just released by the U.S. Pork Center of Excellence, the Swine Reproduction Guide is an analytical tool that provides producers with a decision-tree for identifying breeding problems within gilts, sows and boars. The web-based guide will be available online through Iowa State University Extension and at pork.org.



Pork Checkoff domestic marketing efforts making a positive impact on retail pork sales

Summer campaign, new pork cut names help consumers find value at the meat case

In challenging times for producers, the Pork Checkoff’s domestic marketing efforts are paying off. In a news conference held during the World Pork Expo, National Pork Board officials reported positive response to its consumer campaigns.

"The current consumer campaign, Pork. Be inspired®, is moving product at the retail meat case and in restaurants," says Chris Novak, National Pork Board CEO. "In the first quarter of this year, total pounds of pork sold at retail were up 9.9 percent over first quarter last year and total dollars in sales were up 4.7 percent. Average retail price was down due to higher supplies, but the increased volume more than offset the decrease in average price."

To further bolster consumer demand, a new summer marketing campaign was launched this week to communicate the current relative value of pork, educate consumers on the new pork cut names and reinforce proper pork cooking by talking about the ideal range of doneness.

"This is a critical time for our farmers and a challenging year for the industry overall," says Karen Richter, National Pork Board president and pork producer from Montgomery, Minn. "For consumers, high prices at the gas pump and a tight food budget mean they’re searching for bargains, but they still expect great taste and variety in meals. And that’s good news for pork."

In April, the National Pork Board rolled out new names for some traditional cuts of pork as a way to address the lack of consumer understanding of pork cuts and how to prepare them.

Based on extensive consumer research, the new cut names were selected to enhance value in the meat cuts and new simplified labels were developed to better explain proper cooking techniques.

"This does mean we’ll have to say goodbye to names like ‘pork butt’," Richter says, "but we believe consumers will feel more confident in their ability to choose and prepare pork that provides great flavor and versatility at a budget-friendly price."

The new porterhouse pork chop, ribeye pork chop and New York pork chop are featured in the summer marketing campaign being promoted through national radio and online advertising, food media spokespersons and social media engagement. As a part of the campaign, consumers will be able to tap into online coupons that have proven effective in driving visitor traffic to pork-focused consumer websites.



CHS Foundation Awards $75,000 In Scholarships

The CHS Foundation has awarded 75 $1,000 scholarships to college students studying agriculture. This year's recipients include 50 high school seniors and 25 two-year college students from 28 states. The CHS Foundation is the major giving entity of CHS Inc., the nation's leading farmer-owned cooperative and a global energy, grains and foods company.

"The CHS Foundation values the opportunity to help build the next generation of leaders in the production, science, technology and business of agriculture," says William J. Nelson, CHS Foundation president. "We are proud to support these promising students who will play an important role in shaping the future of agriculture."

An independent, external committee selected recipients based on their career goals, essays, extracurricular involvement, transcripts and reference letters. See below for a complete list of high school and two-year college scholarship recipients and the institutions they will attend.

In Nebraska, the students are:
-- Morgan Bredthauer, Nebraska College of Technical Agriculture
-- Tevyn Baldwin, the University of Wyoming
-- Eleanor Wagner, the University of Nebraska

In Iowa, the students are:
-- Mackenzie Felt, Indian Hills Community College
-- Madison Kirchmann, Northeast Iowa Community College
-- Hannah Riensche, Cornell University
-- Mariah Schmitt, Iowa State University



NCBA President Scott George on the Canadian Government’s Release of a List of U.S. Commodities for Possible Retaliation

Today the Canadian government released a statement in response to the submission of the amended rule on Mandatory Country of Origin Labeling (MCOOL) to the World Trade Organization (WTO). National Cattlemen’s Beef Association (NCBA) President and Cody, Wyo. cattle and dairy producer, Scott George issued the following statement.

 “Cattlemen and women have long known MCOOL not only violates our international trade obligations, but also that it provides no value to the consumer. It is a failed experiment in boosting beef demand and a tremendously successful experiment in creating a trade barrier.”

“NCBA does not oppose voluntary country of origin labeling, but it is a marketing tool not a food safety program. And as a marketing tool, it needs to be run by beef producers and processors, not codified into law or administered by the United States Department of Agriculture (USDA). MCOOL is not market or consumer driven and it does not fit within our international trading obligations.” 

Canada’s government has stated that they are ready to proceed with the next phase of the WTO dispute settlement process on the amended MCOOL rule and has set a list of products for possible retaliatory tariffs. The list includes: beef, pork and chicken in addition to a wide range of grains, fruits and dairy products.

“This list of products brings home the real-world consequences of the USDA’s adherence to MCOOL. Our members have warned both the USDA and members of Congress that should this program continue, there will be a true cost to not only cattle and pork producers but to many other segments of the U.S. economy as well. This is too high a price to pay for a program that has proven it has no value.”



Equine Infectious Anemia Cases Hit Nebraska

            A University of Nebraska-Lincoln horse specialist warns Nebraska horse owners that 12 confirmed Equine Infectious Anemia cases were reported in a horse herd in northwestern Nebraska.

            EIA is a blood borne disease that is typically transmitted by biting insects, such as horseflies, deerflies and mosquitoes, but also can be transmitted from horse to horse through infected needles, said Kathy Anderson, UNL Extension horse specialist.

            “There is no cure for EIA, so prevention is the key to controlling the disease,” she said.

            It is important horse owners take biosecurity precautions to reduce the risk of infection in their herd. For more information to protect the herd, visit www.nda.nebraska.gov.

            The Coggins test, used to detect the presence of EIA, is a simple blood test done by a veterinarian. The Coggins test is often required to transport, show, sell or board a horse.

            A U.S Department of Agriculture website at http://www.aphis.usda.gov/vs/nahss/equine/eia/eia_distribution_maps.htm maps the number of EIA cases in the U.S. for the last eight years by affected state.

            In 2011, there were 82 positive horses and 30 positive premises in the U.S. While there is normally a very low incidence in most areas of the country, EIA is still a disease of concern, Anderson said.

            “As you will see, these are the first reported cases in Nebraska for some time,” Anderson said.

            To read more about EIA, check out the information on HorseQuest at http://www.extension.org/pages/10386/disease:-equine-infectious-anemia or this APHIS fact sheet at http://www.aphis.usda.gov/publications/animal_health/content/printable_version/fs_equine_infectious_anemia.pdf.

            The USDA also has a fact sheet at http://www.aphis.usda.gov/vs/nahss/equine/eia/eia_info_sheet.pdf on the prevalence of EIA in the U.S. from 1972 to 2005. As of 2005, the incidence appears to be less than eight horses positive for 100,000 horses tested.

            EIA symptoms include: fever, depressing, weight loss, swelling and anemia. Producers with horses, donkeys or mules that exhibit these symptoms should contact their veterinarian immediately.



Big Oil Using Distribution Monopoly to Keep Low-Cost, Homegrown E15 Out of Iowa

Linn Coop Oil Company, based in northeast Iowa, this week announced that Big Oil’s fuel distribution monopoly is forcing them to discontinue E15 sales during the summer.  Because E15 is the lowest cost fuel for most motorists, this move hits Iowans pocket books even as gasoline prices are rising.

“Here at Linn Coop, we want to sell homegrown fuels and my customers want to take advantage of clean-burning, low-cost fuels like E15, but refiners are using their monopoly to keep me from offering E15 year-round,” stated Linn Coop Oil Company service manager Jim Becthold.  “I hear Big Oil state that retailers don’t want to sell E15 and consumers don’t want to buy it.  That is flat wrong.  The truth is that Big Oil doesn’t want retailers and consumers to even have the option of E15.”

Earlier this year a number of Iowa’s E15 retailers sent a letter to the oil refiners supplying Iowa asking them to provide the proper summertime gasoline blendstock for E15.  The letter noted that such fuels are already transported by the pipeline servicing Iowa.  Yet, as of the June 1st summertime deadline, no oil refiner allowed Iowa retailers access to the necessary fuel.  That refusal forced Linn Coop Oil Company and Iowa’s other E15 retailers to stop selling E15 as a registered fuel to 2001 and newer vehicles.

U.S. Representative Bruce Braley (Iowa), who joined Becthold at his station today to discuss the situation, stated:  “With the price of gas surging in the Midwest, Iowans should have as many choices at the pump as possible. With their actions, oil companies are essentially restricting the sale of E15, a fuel option that helps reduce the price of gasoline. That’s why they should immediately reverse course and agree to ship blendstock that allows the sale of E15 to more drivers.”

Braley is a member of the House Energy and Commerce Committee that has jurisdiction over the federal Renewable Fuels Standard (RFS).

“Big Oil’s distribution monopoly is very real and very powerful, and the proof is right in front of you,” added IRFA Executive Director Monte Shaw.  “Linn Coop is being forced to temporarily suspend selling E15 as a registered fuel for the summer months, simply because refiners won’t provide access to the proper E15 blendstock, even though retailers like Jim want to sell it and his consumers want to buy it.”

For more background information, please click here.... http://www.iowarfa.org/documents/PetrolDistMonopoly.pdf.  



Nematodes Encapsulated to Better Battle Corn Pests

Nematodes have shown promise as biological control agents in the fight against the western corn rootworm, whose larval stage is a costly pest of corn in the United States and Europe. But current spray methods used to apply the beneficial nematodes can be labor-intensive and water-consuming.

As an alternative, a team of scientists with the U.S. Department of Agriculture (USDA) and the University of Neuchatel (UniNE) in Switzerland is field-testing gel capsule formulations that encapsulate the pest-killing nematode Heterorhabditis bacteriophora. This nematode species poses no danger to humans, pets or livestock, but its lethality to rootworm larvae may give corn growers another option for protecting their crops, together with the use of insecticides and rotations with non-host crops like soybean.

Ivan Hiltpold, a visiting UniNE scholar, is investigating the technology as part of a two-year assignment with Bruce Hibbard, an entomologist with the USDA's Agricultural Research Service (ARS) Plant Genetics Research Unit in Columbia, Mo. ARS entomologist Wade French and UniNE professor Ted Turling are collaborating with them.

Their approach calls for encapsulating Heterorhabditis within an algal-based polymer that's soft enough for the nematodes to escape once applied to soils where rootworm larvae are present. After locating their prey, the nematodes wriggle inside the rootworm larvae and release symbiotic bacteria, which multiply and then kill the insect by poisoning its blood. The nematodes feed on the bacteria and mate, spawning new generations that eventually leave their dead hosts to find new ones.

Although the encapsulated nematodes (about 2,700 per capsule) reduced rootworm damage to corn roots better than spray formulations in trials, refinements to the capsules proved necessary, including determining the optimal thickness of capsule walls and storage conditions. During laboratory experiments, for example, twice as many nematodes escaped capsules stored at room temperature (around 77 degrees Fahrenheit) than at 45 degrees F.

The team is also examining the addition of rootworm attractants and feeding stimulants to better lure the pests to their doom.



Processors Distort Consumer Milk Price Increase Claims
Jerry Kozak, President and CEO, National Milk Producers Federation
The International Dairy Foods Association (IDFA) claims that “the current Farm Bill includes a new intrusive program that would significantly increase the cost of milk, yogurt, cheese, and other dairy products.” The truth is that this program would not increase the cost of any dairy product.

While IDFA picks a single month to assert that the Dairy Security Act (DSA) “would have raised milk prices by about 32 cents a gallon in September 2012,” the study shows that DSA, in fact, would have resulted in lower milk prices than the actual prices 37 out of 48 months and lower prices than the Goodlatte-Scott in 36 out of 48 months. IDFA bases its claim on a recent study of the impact of the DSA and the Goodlatte-Scott amendment, which shows that the DSA would have increased farm milk prices by an average of just one-half cent (0.5¢) per gallon during the period 2009-2012, while the Goodlatte-Scott amendment decreases farm milk prices by one and a half cents per gallon (1.5¢), compared with actual prices during that period.

The responsible conclusion from the facts discussed above is that the very temporary increases in the farm milk price that might occur under the DSA program would not result in any discernible change in the cost of milk and dairy products to consumers or to government food assistance programs that use milk.

IDFA is simply being deceptive in an attempt to alarm consumer groups about a dairy program that would benefit dairy farmers, but not affect consumers.

NMPF Thanks Nevada Governor Sandoval for Vetoing Raw Milk Bill
“The nation’s dairy farmers thank Nevada Governor Brian Sandoval for vetoing a state bill that would have permitted raw milk to be distributed statewide, and in so doing, siding with health experts who recognize the potential danger to consumers of raw milk.

“Thursday’s announcement by Sandoval cited the ‘significant public health risks’ represented by consuming raw milk, resulting in his veto of Assembly Bill 209.

“Gambling with the health of one’s family shouldn’t be one of Nevada’s hallmarks, and we appreciate Gov. Sandoval heeding that message.

“While 20 states prohibit the sale of raw milk to consumers, several states have loosened, or have considered loosening, restrictions on the sale of unpasteurized dairy products in recent years – despite the number of illnesses that have continued to be linked to the product.

“We urge other states considering similar legislation to look to the exemplary leadership demonstrated by Sandoval.”



What Price of Corn is Required to Make E85 Competitive?
Scott Irwin and Darrel Good,  University of Illinois Extension

We and others have written extensively about the impending ethanol blend wall. The blend wall is defined as the maximum amount of ethanol that can be consumed in the domestic motor fuel market if ethanol blending is limited to 10 percent of total motor fuel consumption. The blend wall becomes an issue when the implied RFS mandated requirement for renewable or conventional biofuels consumption exceeds the size of the blend wall. Technically, there is not a mandate for conventional biofuels consumption. There is a mandate for total consumption of biofuels and a mandate for consumption of advanced biofuels. Since advanced biofuels have generally not been economically attractive, consumption of those fuels has not exceeded the mandate so that the difference between the total and advanced mandate has been met with conventional biofuels, almost entirely corn-based ethanol. It is this difference that is thought of as the mandate for conventional biofuels.

As we have noted before, there are a number of pathways for meeting the RFS mandate for biofuels consumption when the implied mandate for conventional biofuels exceeds the blend wall. These include:
-    use blending credits (in the form of Renewable Identification Numbers, or RINs) accumulated from previous discretionary blending to meet current year blending requirements,
-    borrow against future blending requirements to meet current year blending requirements,
-    discretionary blending of advanced biofuels, or
-    expand consumption of higher ethanol blends in the form of E15 or E85.

The use of blending credits was an attractive alternative for meeting blending requirements that exceeded the blend wall until the price of RINs credits exploded beginning in January this year. In addition, the supply of RINs credits is limited, so they are not a source of meeting mandates indefinitely. The second alternative of borrowing against future mandates is not attractive since mandates get larger in the future and borrowing would make meeting those requirements very difficult. The third alternative of discretionary blending of advanced biofuels is technically feasible. That blending, however, would likely have to be in the form of biomass-based biodiesel since additional blending of Brazilian ethanol would displace domestic ethanol, further exacerbating the blend wall problem. Expanded consumption of higher ethanol blends is also technically feasible. It is the general consensus, however, that significant hurdles for E15 will remain in the short and intermediate future. Fueling and consumption capacity is currently in place to expand E85 consumption.

Assuming the RFS mandates are not substantially changed by Congress or the EPA, then, beyond the very near future the pathways of E85 and biodiesel appear to be the most likely alternatives for meeting larger biofuels mandates. For the most part, however, neither of these two alternatives has been economically attractive in the past. Here, we examine the question of what price of ethanol, and the implied price of corn, that are required to allow E85 to be competitively priced at the retail level. There are a few assumptions and a number of steps required in calculating the price of corn required to make E85 a breakeven alternative.

The process starts with the retail price of gasoline. That price has varied considerably over the past six years. Beginning around 2010, for the most part those prices reflect the price of E10. The second step is to calculate the breakeven price of E85 vs. E10 at the retail level. In reality, the ethanol content of E85 can vary between 51 and 83 percent so that the energy value also varies considerably. We assume that, on average, E85 contains 74 percent ethanol and 26 percent Conventional Gasoline Blending Components (CBOB). These are the annual average percentages for E85 in recent years and also the percentages assumed by the EIA for their most recent annual energy projections. As a result, we calculate that the energy value of E85 as 77 percent of E10 and assume that difference is reflected in mileage performance. This means the breakeven price of E85 at the retail level is 77 percent of the price of E10. While the logic for an energy breakeven level of E85 pricing is straightforward, there is uncertainty about whether consumers will in fact require a higher or lower discount to incentivize greater use of E85. On one hand, consumers may require a higher discount if they place a value on the time required to make more frequent refueling stops with E85. On the other hand, consumers may require a lower discount if they place a high value on the use of renewable fuels. Given the small size of E85 use in the U.S. to date, it is not surprising that the available evidence on actual consumer purchasing behavior for E85 is very limited.

The third step is to calculate the wholesale price of E85 corresponding to the breakeven retail price. The average difference between wholesale CBOB and Midwest retail gasoline prices since 2007 has been very near $0.75 per gallon. That difference reflects the retail margin and taxes collected at the retail level. We assume the same wholesale-retail spread for E85.

The fourth step is to calculate the wholesale price of ethanol at Chicago that is required to generate the breakeven wholesale price of E85. That calculation is based on the assumption that E85 consists of 74 percent ethanol and 26 percent CBOB and that the wholesale CBOB price is equal to the retail gasoline price minus $0.75 per gallon. The fifth step is to calculate the price of ethanol at Iowa plants that is equivalent to the calculated breakeven wholesale price of ethanol. Here, we assume a fixed $0.07 per gallon lower plant price to reflect transportation costs.

The final step is to calculate the breakeven price of corn associated with the derived plant price of ethanol. Here we use an updated version of our earlier model of a representative Iowa ethanol plant. We use the model to calculate the price of corn that would result in the ethanol plant covering all variable and overhead costs of operating the ethanol plant. Credit is given for the sale of 16 pounds of distillers'grains per bushel of corn processed at 95 percent of the price of corn and for 0.55 pounds of crude corn oil per bushel of corn processed at $0.45 per pound. A yield of 2.8 pounds of ethanol per bushel of corn is assumed.

In summary, the calculation of breakeven prices of E85, ethanol, and corn are those prices which would allow motor fuel retailers, fuel wholesalers, and ethanol producers to cover all costs and for motor fuel consumers to pay energy-equivalent prices for E10 and E85. Those combinations of retail gasoline prices and corn prices that result in breakeven prices of E85 at the retail level. It is important to note that a direction of causality is not implied by plotting gasoline prices on the x-axis and corn prices on the y-axis. The line simply represents breakeven combinations of the two prices, making use of the assumptions outlined above. One could reverse the axes and the story would stay the same. With that important caveat, the slope of the line (2.65) indicates for each $1.00 change in the retail price of gasoline the breakeven price of corn changes by $2.65 per bushel in the same direction. For a change of $0.10 per gallon in the retail price of gasoline, then, the breakeven price of corn changes by $0.265 per bushel. The average retail price of gasoline on June 3 (indicted in red) was $3.88 per gallon, implying a breakeven price of corn of $5.24 per bushel. In other words, if the price of corn is $5.24 and the pump price of gasoline is $3.88 then E85 can be priced at its energy equivalent value and everyone from ethanol producers to gasoline consumers just breaks even.

Implications
At current retail gasoline prices, spot cash corn prices, around $7, are well above the breakeven price for E85. However, bids for corn delivered during the upcoming 2013 harvest, near $5.25, are right at that breakeven corn price. Depending on the outcome of the 2013 harvest, it is feasible that corn prices could decline below the breakeven price for E85 if retail gasoline prices remain near current levels. If so, expanding E85 consumption could help expand the ethanol blend wall and add to the demand for corn to be processed into ethanol during the 2013-14 corn marketing year. To stimulate larger domestic corn consumption, however, the crop would have to be large enough to prevent corn prices from moving back above the breakeven price due to increased consumption. It is also worth noting the sensitivity of the analysis to the retail price of gasoline. If pump prices drop to $3.50 per gallon then corn prices would have to drop to $4.24 in order to maintain breakeven E85 prices.

The EIA estimated that 11 million vehicles out of the total U.S. fleet of 223 million light duty vehicles in 2012 can use E85. This represents a potentially large base of E85 usage. However, the EIA also reported that only 2,544 of the approximately 160,000 gas stations in the United States can dispense and sell E85. So, even with favorable pricing, the size of the E85 market would likely be limited in the short term due to the limited number and lack of concentration of refueling stations. Because of these limitations on current E85 refueling infrastructure, the DOE estimates that E85 consumption capacity is likely constrained to no more than about 600 million gallons per year. A market of that size could provide room for up to an additional 215 million bushels of corn processed into ethanol. However, a market of that size would not expand the blend wall enough to meet the implied mandate for conventional biofuels in 2014. It appears that increasing E85 consumption above 600 million gallons will require additional infrastructure investments. This will take time and likely limits the size of E85 use through at least 2014.