Farm Futures, IL
11-08-06
Reports Predict Corn Acreage and Price Increases
Two new reports out of Iowa discuss the ethanol industry's impact on corn prices
and acreage.
Farm Futures staff
Two reports out of Iowa, one from the Iowa Ag Review and one from Iowa State
University's Center for Agricultural Research and Development, look at
potential changes in the price and acreage of U.S. corn in the future. Both reports
deal with the effects of the ethanol industry on corn.
A report in the fall edition of the Iowa Ag Review, by Bruce Babcock and David
Hennessy, points out that although ethanol demands are expected to spur higher
corn acreage next spring, farmers will also be taking soy prices into
consideration.
In order for farmers to change their corn-soybean rotations, the report says that
corn prices would need to climb to at least $3.40 a bushel if soybeans were $6 a
bushel, and if soybeans were at $7, corn prices would have to approach $3.80 a
bushel to convince farmers to switch to corn.
The hypothesis takes into effect the decline of corn yields when corn is planted in
the same field two years in a row. Due to lower yields and higher fertilizer
requirements, among other issues, farmers would need a significant advantage
in corn prices over soybean prices in order to make the switch, the report
predicts.
Another study, from Iowa State University, looks at the ethanol industry's
expansion. According to this report, the break-even corn price for ethanol is
$4.05 per bushel at the current tax rates and oil and distillers grains price levels.
This projection has ethanol reaching 315 billion gallons, or 20% of yearly U.S.
fuel consumption, by 2015. This figure would require 95.6 million acres of corn,
an acreage figure far surpassing any in recent years.