Milo, sorghum, or birdseed - if youíre not a farmer from the Plains States: no matter what you call it, it has a unique, if not small share of todayís fall crop landscape.
Even with the progress made in developing hardier seed types of corn, milo still has a better chance of weathering the dry, windy heat that has a tendency to blow across the central plains of Kansas, Oklahoma and Texas without any regular scheduled rain. Milo is also cheaper to plant with relatively lower input costs compared to corn. The downside: it is not the most convenient crop to harvest and your potential bushel production in a good year is going to be better with corn. But the biggest downside has always been price.
With the first advent of genetically modified organisms, specifically herbicide-resistant corn and soybeans, and with the investment in ethanol infrastructure, corn reigned king and enjoyed a much fatter return than milo. But in short order, ethanol producers quickly figured out how to use the birdseed efficiently enough to make it a viable part of their production process. As a result, ethanol plants began to pop up in areas that traditionally raised milo year in and year out. Despite the newfound demand, milo would still rarely fetch the same price per bushel as the yellow stuff. But if milo was ever at a premium to corn, you would grab hold of it with both hands.
But something seems to be changing this fall. Looking at two of the major markets for milo in Hutchinson and Salina, producers have seen a posted basis at the commercial elevators go from a -0.20 cents under the December corn futures price on Sept. 5 to a +0.45 cents on Nov. 21. Thatís a 65-cent price swing in a market that was showing a total cash price of $3.25 on Sept. 5. In the meantime, those same markets have experienced only a nickel improvement in the local posted corn basis, which right now is averaging near -0.10 cents under the December corn futures price.
Talk about a shift in perception.
What happened? In one word, China. Currently, a lawsuit is taking place that has two of the giants in agriculture pitted against each other. Cargill is suing Syngenta over its MIR 162 trait for corn that, by Cargillís claim, was not cleared with our No. 1 foreign export market in China. Without getting into any messy details or picking sides, there is one thing to take away from this at the moment: China has restrictions on importing GMO corn, and they do not for milo. More than that, they have shown a steady, if not insatiable appetite for milo and milo dried distiller grain produced by ethanol plants.
Will this last? Time will tell, and time has a way of removing discrepancies like this, but China has held this view for a while. No matter your beliefs on GMO corn varieties, China has made theirs pretty clear recently.
Itís possible that milo might not just be for the birds anymore, and it may prove to be worth taking a look at your 2015 acreage rotation and making some decisions based on the old mantra, ďThe customer is always right.Ē
Derrick Hermesch works with grain and livestock producers as a Market Advisor with Paragon Ag in Silver Lake, Kansas. He can be reached at (785) 338-9605 or www.myagadvisor.com.