Tuesday, October 31, 2006

The end of IP?...

If the ethanol pot o' gold materializes (and Jerry Gulke's next TP column promises it) I wonder how specialty identity-preserved (IP) programs will fare.

F'rinstance, a 15¢ premium on $2.10 is noticeable. But if corn goes to $3.50 (almost there), why bother? Beans may not be all that different, either.

In fact, for profitablility the more crucial decision is - according to Ken Ferrie - hybrid selection.

Limiting your choices could cost a lot more than a 5% price boost. For me the hassle factor is the problem. Unless you have time to devote to the meticulous records, separate storage, scheduled deliveries, etc. the premium can't cover the effort. Being able to harvest rapidly, store anything in any bin, move it when I want to, and sell to multiple bidders add up to a significant opportunity cost to be weighed against simple premiums.

My guess is IP programs need to suck it up to compete with commodity growing - which just entered a whole new era. That means significantly higher premiums.


Anonymous said...

Just returned from a cotton producer meeting and wondering, is it the end of cotton, too?

John Phipps said...

You gotta be kidding me - can't cotton compete with corn? I really don't have the data to judge.