Southeast Farm Press
02-13-07
Current corn craze intriguing
Farm Press Editorial Staff
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 to 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 cornproducing 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 90million-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.