Iowa Farmer Today
12-15-06
More corn in the cards
By Hannah Fletcher
As high corn prices grab the headlines in agriculture, economists are busy
watching and wondering how the nation’s crop production may shift to meet
demands.
“Biofuels are a big factor in all of this, and there are other things in the mix that
are creating a lot of uncertainty,” says Melvin Brees, market and policy Extension
associate at the University of Missouri.
“The market is saying there is definitely a significant need for more corn acres.
We will probably see a shift from other crops (to corn).”
Brees has noticed an increase in fertilizer purchases. Although the USDA’s
planting intentions report will have a better grasp, he predicts about 6 million to 7
million acres more corn next year.
Because the Western Cornbelt is home for much of the ethanol production, the
outlook for corn is good.
In Iowa and Illinois, the shift to more corn is logical.
Iowa is the nation’s No. 1 corn producing state and also leads the nation in the
number of ethanol plants in operation and planned.
“Farmers in Iowa are looking very seriously at more corn acres next year,” says
Bob Wisner, Iowa State University economics professor.
Should high corn prices hold, many regional farmers likely will switch to more
corn.
Economists expect high prices to last as long as the price for crude petroleum
remains high, support for renewable energy endures and ethanol plants continue
to thrive.
As the projected corn-processing capacity increases, economists say corn
acreage will need to increase to support the industry.
Currently, 25 ethanol plants are running in Iowa with a corn-processing capacity
of about 980 million bushels per year — about 47 percent of the estimated 2006
corn crop in Iowa, Wisner says.
When planned or expanded plants are included, the state’s rated capacities total
about 430 million bu. Plus, most plants can operate at about 20 percent above
rated capacity.
Wisner says, if all the ethanol plants in Iowa are built or expanded as planned,
the corn-processing capacity in the state would need 129 percent of the current
crop.
In fact, in the future, Iowa and other Midwestern states may move towards
specializing somewhat in the lucrative crop, Wisner says.
“Iowa will lean quite strongly in specializing in corn because once more ethanol
plants are built, they are going to want to buy more corn,” he says.
Missouri has typically tended toward soybean production, Brees notes.
“Missouri is a lot more drought prone, and there are more production risks with
corn. For those reasons, most of the time we lean towards soybeans,” he says.
But, Missouri currently has four ethanol plants and several others in early
planning stages. The profitability of corn will be more closely analyzed, he says.
Other areas of the Cornbelt may increase corn acres at a much slower rate,
Wisner says.
“In the Eastern Cornbelt, there won’t be as much (of a shift to corn) as in the
Western Cornbelt, where the ethanol expansion has been the greatest. They are
not seeing the local basis impact that we are seeing around here,” he says.
Local basis in ethanol plant areas often has been higher than river markets and
other traditionally lucrative markets offering a greater incentive to shift to corn,
Wisner says.
The demand for more corn will compete with soybean acres and possibly CRP
and pasture land, he says. This year, the “vast majority” of CRP contracts up for
renewal were re-enrolled, Wisner says.
But, CRP and pasture may be needed in the future to support shifts in corn
acreage.
Only acres that will make the least environmental impact will be considered,
Wisner says.
“In the heart of the Cornbelt, there are about 7 million acres of CRP. Of that 7
million, I don’t suspect more than half these back in production, and most of that
will probably be on a rotation,” he says.
Other areas, such as the Dakotas, may make up for some loss of soybean acres
in the Cornbelt.
“Soybeans will move further west into the Great Plains. It has been moving in
that direction for the past several years,” he says.
New varieties have made growing soybeans more viable in the Dakotas’ and
Great Plains’ drier climates, but yields are not comparable to the Cornbelt, he
says.
As the demand for soybeans grows there, the CRP may be needed for the wheat
crop, which is also boasting high prices.
While producers make acreage-shift decisions largely based on market
demands, Brees says several other factors will continue to play a roll, such as
cost of production and soybean rust.
“There are a lot of things happening. Some of them are very exciting and some of
them are a little scary,” he says.