CMR FAC | Trade, Transportation, and the Global Grain Markets

Todd Gleason: 00:00

From the Linn to Grant University in Urbana Champaign, Illinois, this is a special edition of the closing market report presentations from the twenty twenty five Farm Assets Conference, Trade, Transportation, and the Global Markets. I'm University of Illinois Extension's Todd Gleason. Today, we're diving into the complex world of global grain markets and the critical infrastructure that keeps them moving. Joining us are Colin Waters from the Illinois Corn Growers Association and Mark Wilson, a farmer and chairman of the US Grains and Bioproducts Council. We'll explore the bright spots in corn exports and the vital role of the Mississippi River Basin and rail networks in transporting these assets from the aging lock and dam systems in Illinois to the rising global demand for ethanol.

Todd Gleason: 00:45

We'll begin our discussion by asking Mark and Colin to introduce themselves.

Collin Watters: 00:50

So my name is Collin Watters. I'm the director of exports and logistics at Illinois corn, so our offices are just a few steps down the hall. Yeah. So my my role is primarily working in export market development. I work really, really closely with folks at the US Grains and Bioproducts Council.

Collin Watters: 01:11

And right now, I would say that the exports of corn and corn products are probably one of the few bright spots that we have right now market. So hopefully, can keep pushing that.

Mark Wilson: 01:25

Yeah. My name is Mark Wilson. I'm a farmer up in Stark County, Illinois. I raise corn, soybeans, and custom raise some hogs. I'm chairman of the US Grains and Bioproducts Council for this year.

Mark Wilson: 01:35

And US Grains Bioproducts represents corn, barley, sorghum, ethanol, and DDGs. And in everything except sorghum, we're seeing record exports this year.

Todd Gleason: 01:48

Let's start on the transportation side. This is one of the areas that you specialize in, Collin. Transportation in The United States for grains, can you talk about the systems that are assets to Illinois whether they be rail or truck and or of course our Mississippi River Basin?

Collin Watters: 02:08

Yeah. So, you know, Illinois is is situated in a really special place in The United States to be perfectly honest. There's a lot of a lot of farmers outside of outside Illinois that would that would love to be able to access the the freight networks that we have available to us. So the fact that Chicago is the the kind of the center hub for the The US in terms of rail. We have every class one railroad and and oftentimes some of some of those the some of those rail lines will will parallel too, so there's some competition amongst the railroads that, you know, for the for the gentleman that was talking about out in Montana, I lived out there for a while.

Collin Watters: 02:57

You have one option, you know, on on the BNSF. And if the BNSF wants, you know, x dollars, you pay it. And that ultimately will, you know, come out of the farmer's pocket. But I think the the real asset, the the real difference maker for for folks in Illinois is the the waterway system. It's an incredibly efficient system.

Collin Watters: 03:21

And although we've we we believe that it could be far more efficient, it it certainly is it's a huge benefit, and you can see that in basis numbers just over time. So actually, my my colleague Jim Tarman, who's sitting in the back there, has been working on lock and dam infrastructure for the thirty years, Jim. He's gotten a little bit done, but he's still got some more work to do. Another thirty years, Jim, and I think he'll get it done. But yeah.

Collin Watters: 03:53

That you know? But the the trouble with waterways is, you know, you have high water, you have low water, there's there's some some seasonality built into that, but it's a it's a huge huge benefit for for farmers.

Todd Gleason: 04:06

Hey, Jim, can you come forward for just a second and talk about the things that still need to be done or what's on the list possibly? Or do you want Colin to do it? Because that was my next question, was going to follow-up with him on. What efficiencies do we not have that you think we should have in the system, in the waterway system? What do we have left to build out?

Todd Gleason: 04:29

And I'll bring a microphone to you so that you don't have to walk all the way up. Jim of course is with the Illinois Corn Growers Association.

Jim Tarman: 04:39

Our system that we've been working on for, as Colin mentioned, for you know, some thirty, thirty five years. The locks and dams on the system were were built in the thirties and forties. And, you know, by golly they've outlived there, they were only expected to last like fifty years. Most the locks and dams in the system now are seventy five years plus. On one hand, I'll commend the US Army Corps of Engineers who's in charge of keeping them operational and as efficient as they can, has done a good job.

Jim Tarman: 05:18

But also on the other hand, we you know, I could criticize them for not keeping up and not pushing forward and not staying focused on the areas of need. Back in 2002, I think our focus began on a program called NESP, Navigation and Ecosystem Sustainability Program, which in essence was where the real bottleneck was within the Upper Mississippi River system. And that that exists on Locks 20 through 25 on the Mississippi, and the La Grange And Peoria, yeah, La Grange And Peoria Lock there. Those those were determined the locks that were costing you as farmers and landowners the the most inefficiency, if you will. So fast forward, we got authorization and approval for those locks and dams, but you know and we said, yay yay, hey we've got this, we're just about there.

Jim Tarman: 06:23

Well authorization does not provide you funding. And then we started down the path of funding and up until the FY 2022 when we finally pushed the ball over the hill and received IIJA funding for the first NES block if you will, Lock 25 which is in Winfield, Missouri. We received 700 at the time, we not only received partial, we thought we were only going get partial funding but we received $732,000,000 was supposed to complete it from start to finish. And again we said, yay, We finally are going to start improving our system until the core went back doing one of their reevaluations of how much it's actually going to cost and now that cost is now $2,200,000,000 So we have less than half of the funding that we need to do that. So now we're back in the mode of trying to get the court to focus on specific things, where's the money going to come from.

Jim Tarman: 07:32

You know, we're still we're still moving forward, but it's not not quite as fast as what we thought initially it was going to be.

Todd Gleason: 07:38

And then improvement in efficiency is doubling the length of the locks?

Jim Tarman: 07:42

Yes. They are. I'm I'm sorry. I'm 600 foot understands it like I have for the last thirty years. So those locks that I that I mentioned, they're all 600 foot locks.

Jim Tarman: 07:52

You know, back in the thirties and forties, everybody, you know, during during the New Deal, everybody probably thought, man, what a boondoggle this is because, you know, we were steam powered paddle wheel pushing through 600 foot locks. I mean, they are way too big. Well, a modern tow now is is 1,200 foot and so a double lockage generally generally takes give or take two to two and a half hours. So anyway, we're the what's being proposed through NEST is 1,200 foot locks at those locations I I mentioned and depending on how much traffic's around there, that'll cut that down to a half an hour or less for them to transit through those locks and dams.

Todd Gleason: 08:33

Thank you very much Jim and thank you. I appreciate you taking some time. Jim Tarmanov is with the Illinois Corn Growers Association. If you drive through Peoria on Interstate 474, and my mother-in-law is from the other side of Peoria from here, and so I go by by this all the time. Jim, you'll have to help me.

Todd Gleason: 08:49

Is is the crane that lifts the dam steam powered there? Do you remember?

Jim Tarman: 08:57

Used to

Todd Gleason: 08:58

be. Used to be.

Jim Tarman: 08:58

Until about eight

Todd Gleason: 09:00

to ten years ago? Yeah. Yeah. So so this is one of the unique things about that dam in Peoria. If you go by sometimes when the river's high, the dam is down.

Todd Gleason: 09:11

It's actually a folding dam and you'll see a little steam powered what was a steam powered crane that will reach down. It's got a hook on it and pull pickets up up one at a time to close that dam up when things are low and they can then lock through the area. It's just extraordinary the kind of things that have happened over the centuries, now century I suppose, that allows corn and other products, soybeans to go down river, coal, and hydrous ammonia to come up river, other things fertilizer as well. So Mark, let's talk a little bit about what demand is. What do you think from the US Grains Council is the best option for future demand for corn outside of The United States at this time?

Mark Wilson: 10:00

Well, ethanol. By far ethanol. I just talked with the head of poet, Doug Bourbon, and he's more excited now than he's ever been with ethanol. He said before RFS one, two, he said he's more excited now with the potential for ethanol. A

Collin Watters: 10:21

lot of

Mark Wilson: 10:21

that is due to all the countries around the world adopting 10%, 15%. India is going to 20% ethanol in their fuels. The big one nobody is talking about which could be huge is maritime fuels. Maersk, which is the number two shipping company uses 6,000,000,000 gallons a year. They're doing the test right now with a engine that will do half methanol, half ethanol.

Mark Wilson: 10:49

And there's a lot of talk that they're wanting to get out of this bunker crude which is dirty, just black, smoky fuel to get that out. So that could be a huge market because that's number two. That's not all of the market. There's a lot going on with that. Cooking fuel, India, if they adopt because right now they're using dung cakes and sticks and coal to cook with in a lot of the villages.

Mark Wilson: 11:18

If they adopt clean burning ethanol cook stoves, which we've done studies and done some pilots with them. If they adopt 1% of the people cooking the other way, ethanol cook stoves, that's 40,000,000 gallons right there. 40,000,000 gallons for 1% and if we can get 10, that's 400,000,000 gallons. So there's a lot of this going on all over. Like I said corn, we're at record levels on exports, we're already above last year's already this year.

Mark Wilson: 11:48

Mexico has just been huge, they're just continuing to increase their production down there and that's going up every year. I know we talked about whether you hate Trump, love Trump, doesn't matter. There's 35 countries that we have agreements, frameworks, executive orders, whatever done with. In the past when we did trade agreements, it took two to seven years to get a trade agreement. These have been done in two to five months.

Mark Wilson: 12:18

The only problem is these are executive orders and anybody can come in, Trump himself can change them. But right now we're seeing a lot of excitement out there. This is more excitement than we've had in decades to trade, to getting out there and making deals, making things happen and we're seeing that.

Todd Gleason: 12:39

Are you concerned at all that these are simply executive orders and that a change in administration will mean that they simply won't be enforced even if they're not rejected?

Mark Wilson: 12:49

It depends on how well they work. I mean, you look at the steel tariffs, they were put on by Trump. Biden extended them and made them stronger. So if these are working and we're seeing product move, I don't see why a president would want to stop that.

Todd Gleason: 13:07

Jet to fuel, I mean ethanol to fuel on the liquid side. What do you think about that one and how close might it be? Both of you can comment on this because it appears, Colin, you have something to say too.

Collin Watters: 13:19

Ethanol to jet. That's what you're

Todd Gleason: 13:20

Ethanol to jet. Sorry. I'm yes.

Collin Watters: 13:23

So, you know, I I think that there's in the last couple years, there's been a lot of press and a lot of discussion about ethanol to jet. And so for for those who who aren't familiar, basically, jet fuel is more or less kerosene. And what you can do is you can break the ethanol molecule down and then rebuild it into, you know, a drop in fuel or close to a drop in fuel. The the the technology exists. It's it's not just a theoretical thing, but it hasn't been really commercialized yet.

Collin Watters: 13:57

I I believe the plant in Georgia has restarted, but that's a more or less a demonstration facility. And I think that their may their max is, like, 10,000,000 gallons or something like that. I I can't remember exactly what it is. So so today, most of the sustainable aviation fuel that's available in the market, most all of it is is is derived from from oils. So whether it's, you know, beef tallow or use cooking oil or soybean oil, palm oil, whatever.

Collin Watters: 14:32

And I I suspect that that, you know, that that will increase a little bit, but there's a limit. We we do have a a limit on how much vegetable oil is available in the world right now. And so so that's why the there's a lot of interest in in alcohol to jet or ethanol to jet fuel. I I'm I'm optimistic, but I think that that's probably a five to ten year type timeline, and that's me being maybe a little bit optimistic about it, I suppose. It's I I think it'll come, but I don't think it's going to be the the panacea that I think some people have maybe made it out

Mark Wilson: 15:14

to be. Yeah. I think the the price of it is the big thing. It's about three times the cost of regular air fuel by the time they go through everything and I think that is a hindering point without some type of support by governments or something to get that through. It's going to be a little harder but Japan is pretty well they are pushing hard on this and they're pushing that they think that alcohol to jet is the way to go and they are seriously looking at building plants that are carbon sequestration is huge with them because they're all about carbon and getting that score as low as possible and if they can get the carbon sequestration that makes our ethanol way better to get into that fuel.

Mark Wilson: 16:00

And one thing

Collin Watters: 16:01

that I I do wanna note just what Mark was talking about in carbon intensity. That's a that's a really key part of all of this in terms of the sustainable aviation fuel. For for it to be considered sustainable aviation fuel, it right now, at least under the international kind of guidelines, is it has to meet at least a 50% reduction in carbon intensity. And so that's that that's something that's really, really important kind of and that's this foundational issue is that in in order for for ethanol to jet to become a reality, you the the the process of of, you know, breaking the molecule apart, rebuilding it, all of that adds carbon intensity. Right?

Collin Watters: 16:43

So your your beginning ethanol feedstock has to be at a low enough carbon intensity that it can be manipulated and built into SAF, sustainable aviation fuel, to reach that 50% target at least. That's the way that

Todd Gleason: 16:59

it

Collin Watters: 16:59

works. So as farmers, I think that we're and I've said this before, I keep saying it probably. We're gonna be talking about carbon intensity more and more and more. This is gonna become a part of the vocabulary, and I I'm I I don't know how this is all gonna play out, if there will be kind of incentives for for practice changes or or anything else, but I I can foresee a future where, you know, commodities are are potentially marketed with, you know, certifications on what your what your carbon intensity is. So so, you know, you know, it this is gonna be getting more and more complicated, I think, as time goes on.

Todd Gleason: 17:47

The CI scores are driven on the global front. Often time the carbon intensity score is part of the climate change discussion. How does how did the politics in The United States play into that issue and what might be a marketplace for corn on the world stage, but needs to be ready to go out of The United States?

Collin Watters: 18:14

Well, I guess from what what I've seen in in in conversations that I've had with folks from really all over the world, most everyone else is continuing in in a push to decarbonize their their energy sectors. That I mean, that's the broadest brush that I could use. You know, even in The United States right now where the the current administration is kind of dialing back on on some of the some of the measures, whether it's the the CAFE, NHTSA standards or or and I'm sorry. That's a your your your fuel efficiency standards that, you know, new new vehicles are required to meet. That's it's getting dialed back, but it's it it basically, what it's doing is just kind of affecting the the the trajectory.

Collin Watters: 19:06

Right? It's it's not that it's completely falling off. It's just moderating a bit. So the the the push for for biofuels really around the world is it it's it's happening regardless. You know, Mark had mentioned the push for e 20 blending in India.

Collin Watters: 19:29

Well, that's a that that has more to do with air quality issues. And and to be perfectly honest, I think it has a lot more to do with local economic development. You know, half the population in India is involved with farming. We know how important biofuels are to the farm economy here. It's the same thing in India.

Collin Watters: 19:51

Right? You know, the the Japanese have made commitments through, you know, the Paris Accord or or or other, but they're they're also looking at their refining industry on a real steep decline. So they're trying to innovate and make their kind of rejuvenate their refining sector to to prop that up. So there there's other reasons, I guess for for countries pursuing biofuel policies outside of just purely, you know, climate stuff. And I'd say the other thing is

Mark Wilson: 20:32

ethanol is the cheapest source of octane out there. If they want to add octane, they can make their gas cheaper, they add ethanol to it and that makes, mean Japan's looking at, I mean we keep talking about Japan but that's a huge market. Mean they're going to E10 in their gasoline. When they get to E10 which they say by 2030 they'll be E10, that's 1,000,000,000 gallon market. Right now we're shipping a 100,000,000 gallons over there.

Mark Wilson: 20:56

That's a billion gallon market with a B. They will probably source probably 85% of that from The US because they don't want to put all their eggs in one basket, they want to diversify a little bit but they are great trading partners, they like dealing with us. They have a goal of 10% SAF by 2,030 and I think everybody knows they're not going to be able to make that. That's just too big of a jump but they are on a path to get that done to work through that. The other countries are still continuing to move forward on things and they know that presidency is in The US, it's only a four year term.

Mark Wilson: 21:36

So they're not going to stop everything for that.

Todd Gleason: 21:39

Mark, what is the US Grains and Bioproducts Council doing on the front of the other grains, sorghum and wheat? And I'm asking this question because it sure would be nice if Kansas and the Dakotas planted more wheat acres and or more sorghum acres and fewer corn acres so that could be an Illinois Iowa thing.

Mark Wilson: 22:00

I don't have anything to do with wheat, that's the wheat growers. I don't mess with them. We have sorghum and sorghum took a huge hit. 85% of all sorghum exported went to China, 65% of all sorghum grown in The US went to China. They bought nothing last year.

Todd Gleason: 22:18

We need wheat and sorghum not to be a feedstock in The United States because it's located so much closer to the feedlots. Any final words from the two of you?

Collin Watters: 22:28

I would just say as a former wheat and barley guy, the best thing that you can do to help those wheat and barley farmers is drink more beer and eat more bread. I it's at it's got it's 05:00 somewhere. I'd say

Todd Gleason: 22:42

No barley, no beer. That's what my my daughter worked for Anheuser Busch for a while, and that's what they say in the Dakotas. Give them a nice round of applause. Thank you very much. Mark Wilson and Colin Waters, take a few minutes.

Todd Gleason: 22:56

I'll call you back. You've been listening to the trade transportation and global markets presentation from the farm assets conference with Mark Wilson and Colin Waters on this edition of the closing market report that came to you from Illinois public media.