Des Moines Register
03-31-07
What '07 corn rush means to you
Hoping to cash in high prices, Iowa farmers are using the most land since 1985
to plant corn. But the trend could have profound environmental implications,
experts warn.
By PHILIP BRASHER
REGISTER WASHINGTON BUREAU
Washington, D.C. - With grain prices soaring, U.S. farmers are set to seed more
land to corn this spring than at any time since 1944, when the government was
pressing growers to alleviate wartime food shortages.
Farmers intend to plant 90.5 million acres of corn this spring, a 15 percent
increase from 2006, according to a widely anticipated report issued Friday by the
U.S. Agriculture Department.
Barring bad weather, that's good news for everyone from grocery shoppers to
ethanol producers and hog farmers, because the big crop would help moderate
prices for corn and food.
U.S. farmers have faced an international backlash over surging grain and food
prices, brought on by the nation's booming fuel ethanol industry. Critics, from
meatpackers to environmentalists, have warned that the United States cannot
fuel the country's cars while keeping food prices affordable to the poor.
Iowa farmers are increasing their plantings of corn by 10 percent, to 13.9 million
acres. That's the most in 22 years, though shy of the record 14.4 million acres of
corn that Iowa growers planted in 1981 when President Reagan ended the Soviet
grain embargo.
"It's good news that the corn industry is stepping up to the plate to fill the
demand," said David Nelson, a Belmond corn and soybean grower who is
chairman of Global Ethanol LLC, which operates an ethanol plant at Lakota.
Nelson and his two brothers will plant about 70 percent of their acreage to corn
this year, up from 63 percent last year, he said.
Agriculture Secretary Mike Johanns said the report should "help to ease concern
about our corn supply."
He dropped the idea of letting landowners remove idled acreage without penalty
from the federal Conservation Reserve Program, which pays farmers for taking
land out of production and putting it into grass, trees or other soil-conserving
uses. The land could have been planted to corn in 2008.
There's still plenty of risk that farmers won't plant as much corn as predicted, if
wet weather in April keeps them out of the fields.
"We're damp here and they're calling for cold weather," said Julius Schaaf, who
farms near Randolph, in southwest Iowa.
Schaaf has been planting equal amounts of corn and soybeans for years, but
intends to increase his corn acreage by 10 percent this spring.
"If I can't get that extra 10 percent under normal (weather) conditions, I'll switch
back to my old rotation," he said.
The USDA's report, based on an extensive survey of farmers, exceeded analysts'
expectations, and corn futures dropped the market limit of 20 cents per bushel on
the Chicago Board of Trade. The price of corn for May delivery fell to $3.74 a
bushel.
But stocks of corn are so tight, down 13 percent from a year ago, that poor
growing conditions could send prices soaring later in the year, analysts said.
"It's too early to tell whether this crop will be large enough to satisfy demand or
not," said Larry Salathe, a USDA economist. "It's pointing in the right direction."
The chairman of the Senate Agriculture Committee, Iowa Democrat Tom Harkin,
said the increase in corn acreage "should help to address concerns about corn
supplies." But he cautioned that "higher production in response to strong prices
can also lead to oversupply and lower prices."
The big increase in corn acreage could also raise environmental concerns.
Corn generally requires more pesticides and fertilizer to grow than most major
crops. Excess nitrates from fertilizer can run off fields into streams and rivers, a
concern to Des Moines and other cities that must treat the water for drinking.
"Dramatic expansion of corn production for the ethanol industry has profound
environmental implications that are being almost entirely ignored in Washington,"
said Ken Cook, president of the Environmental Working Group, a research and
advocacy organization.
More than ethanol producers, livestock farmers and food processors have been
awaiting the USDA report for weeks. Cook even invited readers of his blog to
offer their guesses of the survey's outcome.
Friday's numbers were welcome news to livestock producers, although they'll be
watching nervously to see if farmers grow as much as they've told the
Department of Agriculture they will.
Corn is used to feed cattle, hogs and poultry, so higher corn prices mean
consumers are likely to pay more for meat and dairy products. It takes about 10
bushels of corn to raise a hog and 50 bushels or so to fatten one steer in a
feedlot.
Hog producers are "cautiously optimistic that this (increased corn acreage) will
help us in the short term," said Dave Warner, a spokesman for the National Pork
Producers Council.
"Much will depend on the weather and other factors," said Bill Roenigk, chief
economist for the National Chicken Council. "And even with the increased
acreage, there is little doubt that corn will remain at historically high price levels."
The cost of producing a chicken has gone up 40 percent since last summer
because of the higher corn prices, he said.
The increase in corn acreage means that farmers will plant less land to
soybeans. However, soybean processors got some good news Friday in a USDA
report showing that stocks of the commodity are 7 percent higher than they were
a year ago. Increased production of soybeans in South America also is expected
to help compensate for the reduced U.S. acreage.
In Iowa, farmers expect to plant 9.2 million acres of soybeans this year, down
from 10.2 million in 2006. Nationally, soybean acreage is expected to fall from
75.5 million last year to 67.1 million in 2007, a drop of 11 percent.
In the South, many farmers are switching from cotton to corn. Cotton acreage is
expected to fall by 20 percent.
The shift to corn should moderate corn prices, while boosting prices for soybeans
and cotton, said Joe Victor, a commodities analyst for Allendale Inc.
Iowa is the No. 1 producer of corn and soybeans.
With last year's average yield of 166 bushels per acre, Iowa would produce 2.3
billion bushels of corn this year, surpassing the 2004 record of 2.2 billion bushels.
The state's average yield in 2004 was a record 181 bushels per acre.
Farmers in Illinois, Minnesota and North Dakota all intend to plant record
amounts of corn this year. Illinois farmers plan to plant 12.9 million acres, up 1.6
million from 2006.
CHEAPER MEAT, DAIRY If farmers follow through with their plans, the
increased corn acreage should help hold down corn prices. That in turn means
the prices of meat and dairy products won't increase as much as they otherwise
would, said Chad Hart, an economist at Iowa State University. The price of
feed corn is a major cost of producing livestock.
Reporter Philip Brasher can be reached at (202) 906-8138 or
pbrasher@dmreg.com