Des Moines Register
04-01-06
Farmers to cut corn acreage
If higher prices result, consumers may face most impact at gas pump
ANNE FITZGERALD
REGISTER AGRIBUSINESS WRITER
U.S. farmers plan to decrease corn plantings by 5 percent this year, the
government reported Friday, which could send corn prices to their highest level in
a decade.
That could boost income for farmers but squeeze profit margins for Iowa's
growing ethanol industry and livestock producers. Consumers will see little
impact at the grocery store but could see higher prices at fuel pumps.
The U.S. Department of Agriculture said farmers intend to plant 78million acres
of corn this spring and 76.9million acres of soybeans, up 7percent from a year
ago.
Market analysts had expected corn acreage to shrink, as farmers struggle with
how to contain costs of fertilizer, fuel and other inputs, but the Agriculture
Department reduced corn plantings and increased soybean plantings more than
grain traders had anticipated.
"We've never seen a report with such a huge decline in corn acreage from where
the trade was," said Jim Bower, president of Bower Trading Inc.
The stakes are high for Iowa, the nation's No.1 corn-, soybean-, egg- and porkproducing state. Iowa also is the nation's top producer of corn-based ethanol. If
Iowa farmers harvest another bumper crop, the high corn prices would boost
their incomes as well as help retailers and state tax revenues.
Economists and market analysts said end users of corn, including livestock
feeders and grain processors, would be most affected.
Food prices would likely change little, because corn-based ingredients in food
products typically account for a tiny portion of the cost of producing those foods.
But higher corn prices could drive up ethanol's price, analysts said. Tight ethanol
supplies are already pushing up prices around the nation.
The cut in corn acres, if realized, would result in the smallest U.S. corn acreage
since 2001 when U.S. farmers planted 75.7million acres, the Agriculture
Department said. Soybean plantings, on the other hand, would be a record for
the United States, the agency said.
"It's a landmark number," Bower said of the planted corn acreage projection.
"Obviously, it's a shell-shock market."
Robert Wisner, an Iowa State University Extension economist, said cash
corn market prices could average $3 or more per bushel in the marketing year
that ends Aug.31, provided widespread drought develops — something that
weather experts said could occur.
"If the weather people are correct on that, then, yes, we would likely have $3 per
bushel corn or slightly higher than that," Wisner said.
Iowa farmers have not seen corn prices that high since the mid-1990s, he said.
The Agriculture Department said Iowa farmers expect to plant 12.5million acres
of corn and 10.4million acres of soybeans, more than any other state. That would
be 2percent fewer planted acres of corn but 3percent more planted acres of
soybeans than in 2005.
States throughout the Midwest generally reported larger percentage decreases in
planted corn acres than Iowa, as well as larger increases in intended soybean
plantings.
North Dakota was the anomaly: Farmers surveyed there said they intend to plant
17percent more corn acreage and 41percent more soybean acreage this year.
Iowa cash market prices or corn averaged $1.95 per bushel on Friday, up 6 cents
for the day, while cash soybean prices averaged $5.24 per bushel statewide,
down 17 cents, according to the Iowa Department of Agriculture and Land
Stewardship.
On the Chicago Board of Trade, May corn futures prices closed at $2.36 bushels
per acre Friday, up 8.
Grain traders said it was too soon to tell how accurate the figures would prove to
be, and they predicted that weather would be the key determinant of planted crop
acreage in Iowa and other Midwest states.
Although soil moisture levels are rebounding in the western Corn Belt, drought is
expanding in southern Indiana and Ohio, said Greg Soulje, agricultural
meteorologist with the U.S. Farm Report.
Even in areas hard hit by drought last year that have received precipitation
recently, the moisture recharge has been uneven, and drought could re-emerge,
he said.
"The drought is not over with,'' Soulje said. "Easing, but not over with."