New barley market spurs research effort

The Osage Bio ethanol from barley plant in Hopewell, Va., has spurred renewed interest in barley production among farmers and is the impetus for a multi-faceted Bio Energy Cropping Systems research project by a diverse team of Virginia Tech researchers.

When in full operation, the Hopewell facility will need to pull barley from the entire mid-Atlantic region to supply an annual demand of 30 million bushels. Perdue AgriBusiness will purchase all barley for the facility using its regional network of elevators.

Virginia Tech Extension Farm Business Management Agent Eric Eberly says contracting for June 2010 delivery has already begun and growers who contract early will receive a premium and the choice of delivery month.

The premium price is based on the delivery month and was initially 75 percent of the July 2010 CBOT corn futures price for June 2010 delivery. Pricing for July 2010 delivery would use the September 2010 corn futures price. Growers can decide to price barley on any day following contract signing until it is delivered. The growers who delay this decision to contract will need to provide storage for the barley until it’s needed and could potentially lose this market entirely, Eberly says.

Economics is a driving force behind the Bio Energy tests being conducted by Virginia Tech researchers David Holshouser, state soybean specialist; Wade Thomason, Virginia small grains apecialist; Virginia Tech economist Gordon Grover and others.

“The primary reason more Virginia farmers don’t grow barley is a lack of market. Now, Osage Bio is offering a stable market, a fair price for barley (75 percent of corn future prices) and more growers are interested in growing the crop,” Holshouser says.

The economics, based on five year production (2003-2007), back up the Virginia Tech researcher’s comments. With corn selling for $4 a bushel, soybeans for $8 a bushel and barley for $3 a bushel over the past five years, price would be a dead heat, or right at $500 per acre for either corn or double-crop soybeans and barley.

In tests at Virginia Tech’s Tidewater Research and Extension Center in Suffolk, Va., Holshouser’s research team will be looking at three or four cropping systems — all geared to maximum biofuel potential and maximum profitability for Virginia farmers.

“The overall objective of the study is to agronomically and economically compare several cropping systems: Full season soybeans, wheat and double-crop soybeans and barley and double-crop soybeans.” Grain sorghum behind barley will be the fourth system we look at,” he adds.

“Grain sorghum is a drought tolerant crop that may be a possibility on some of our poorer soil. We looked at it intensively a few years back in what some people still call “Milo Mania’ and the general agreement was that dryland corn is a better option. We have better grain sorghum varieties now and possibly some new markets — should grain sorghum one day be used to produce ethanol,” Holshouser says.

A frequently asked question among Virginia grain farmers is: “Why do my beans do better behind barley than behind wheat.” The pat answer is barley allows farmers to get beans in earlier than when planted behind wheat, hence planting date is the reason.

“We don’t really know whether planting date is the only or even major reason that double-crop beans do better behind barley than wheat. Hopefully, this study will give us a better understanding of why beans behind barley is better,” Holshouser says.

“For example, we know wheat does leach some of the chemicals beneficial to soybean production. We don’t know that about barley, because no one has looked at that in our area of the country,” the Virginia Tech researcher adds.

In the ongoing study, the Virginia Tech team will try to determine whether planting date or crop residue account for the barley-bean advantage.

In addition to a number of different planting dates, the Virginia researchers will be looking at the effects of a rye cover crop, versus no cotton or corn residue.

“We will evaluate the environmental effects on the different cropping systems. We will pull out the soil moisture, rainfall and crop residue differences. At the end of the summer of 2010, we should be able to pull all this data together and give growers some better recommendations for growing barley in double-cropping systems and in rotation with other crops,” Holshouser says.

Kevin Engle is one of Virginia’s largest barley producers, and he echoes what Holshouser says about barley/soybean yield advantages over wheat/soybeans. Engle grows most of his barley under irrigation, which he says, is a big boost for the soybeans that follow. “Our best soybeans come after irrigated barley, so we are maximizing our crop yields, and at the same time, maximizing use of our irrigation equipment,” he says.

Though Engle has been growing barley a number of years, the impetus for new barley production in the state is most likely to come from the stable market supplied by Osage Bio’s barley-powered ethanol plant in Hopewell. Officially named the Appomattox Bio Energy Plant, the Hopewell, Va., site is progressing ahead of schedule and is expected to begin operation in the summer of 2011.

Virginia farmers have a long working relationship with Perdue, and the recently announced partnership between the company and Osage Bio should give growers added confidence in the long-term viability of the barley-based ethanol plant.

Perdue AgriBusiness will source barley to operate Osage's first barley-to-ethanol bio-processing facility. “We are thrilled to be working with Perdue AgriBusiness. Their partnership validates our idea that this region is ready to revive the market for barley,” says Craig Shealy, president and CEO of Osage Bio Energy. “Perdue AgriBusiness is committed to working with local farmers to help make our goal of feeding our plant with locally grown barley a reality.”

The combination of farmer interest, the economic viability of Osage Bio and Perdue and science-based recommendations from Virginia Tech appear to have barley well placed to compete for winter crop acreage in the upper Southeast in the coming years.

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TAGS: Corn
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