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Current corn craze intriguing

Still haven’t decided exactly what or how much corn to plant this year? Still haven’t jumped onto that corn bandwagon with everyone else?

These are difficult choices to make in a difficult time. Most farmers have been in the position of planting fence-row to fence-row of the “hot crop” of the moment only to find themselves on the short end of prices later due to over-supply or other unforeseen market events.

The current demand for feed and the rapid expansion of ethanol production would appear to indicate a need for corn for as far as the eye can see, and growers in the Southeast certainly are taking this as a cue to plant all the seed they can find.

An Extension cotton specialist in north Alabama reports that much of his time these days is spent holding corn meetings — something he hasn’t done in about 20 years. And growers in south Georgia who have never before planted the crop intend on planting thousands of acres of corn in 2007. These are just a couple of the stories we’re hearing in the field.

But if you’ve been in farming for any length of time, you know there are no certainties. Crops, like stocks, can seem like a sure thing one day and a dog the next. Yet, the current “corn craze” is intriguing for its possibilities.

According to the Renewable Fuels Association, 110 ethanol biorefineries were operating in 19 states at the end of 2006 with a capacity to produce more than 5.3 billion gallons of ethanol, an increase of 1 billion gallons from the beginning of the year. In addition, 63 ethanol biorefineries and eight expansion projects are set to come online in the next 18 months that will add nearly 5.4 billion gallons of new production capacity. Ethanol currently is blended into more than 45 percent of the nation’s gasoline.

Beyond this, there are more than 300 business proposals pending for additional ethanol plants, which if built would create more than 20 billion gallons of ethanol.

In testimony late last year before the Senate Committee on the Environment and Public Works, USDA Chief Economist Keith Collins outlined a scenario for the year 2010 in which 90 million acres of corn are needed to fulfill ethanol, livestock and export demands. Collins indicated that corn prices would need to be in the $3.10 to $3.20 range to attract that many acres of corn, and the CBOT futures already had surpassed that as of this writing.

According the Chad Hunt — an agricultural economist with Iowa State University — the last time the United States planted more than 90 million acres of corn was in 1944. In 1932, more than 113 million corn acres were planted. In that year, Texas was the sixth largest and Georgia was the tenth largest corn-producing state, with nearly 10 million corn acres between them. So a historical analysis would indicate the possible return of corn acreage in the Southeast and Great Plains.

But Hunt points out that corn acreage in the Southeast and in the western Great Plains is much lower today than it was in the 1930s and 1940s, and a sizable amount of the land planted to corn during those earlier decades is no longer in agricultural production.

In 2006, Georgia corn producers planted 280,000 acres and Texas had 1.75 million acres. Total cropland in Georgia is now less than five million acres. Meanwhile, the upper Midwest is devoting the same amount or more acreage to corn than was the case in the 1930s and 1940s. Iowa, Illinois, Indiana, Michigan, Wisconsin and Minnesota have more corn acreage today than they did during the 1930s.

Given the decline in the agricultural land base in the Southeast, says Hunt, additional corn acreage likely will have to come from where corn is already plentiful, the upper Midwest and the eastern Great Plains.

In 2006, U.S. producers planted nearly 80 million acres of corn, 10 million acres shy of the projected demand for 2010. According to Hunt, both the Food and Agricultural Policy Research Institute (FAPRI) and Informa have projected 2007 corn acreage at roughly 83 million acres. In both cases, the corn acreage mostly comes at the expense of soybeans.

The most likely source of new corn acreage, he says, will come from shifts in crop rotation from soybeans to corn. In most of the Corn Belt, corn and soybeans are planted in a two-year rotation. Planting corn two years in a row usually results in a 10 to 20 percent yield decline in the second year. This well-known yield effect drives many producers to a “standard” corn-soybean rotation.

The potential exists, says the economist, for the United States to reach a 90-million-acre corn crop in the near future, and he contends that most of the “new” corn acres most likely are in corn production now.

“Given the crude oil price outlook for the next several years, ethanol’s expansion is apt to continue for some time. Even under higher corn prices, ethanol returns still look promising. And as Collins pointed out in his testimony, given fuel prices and the demand outlook, ethanol plants likely will compete for corn even at record-high corn prices. The full need for additional corn acreage will depend on many factors, including fuel prices, fuel demand, and the demand for corn for livestock feeding,” says Hunt.


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