February 1, 2007

 

High corn prices cause some southern US cotton farmers to switch

 

 

Dee Vaughan started planting cotton only two years ago. But high prices from demand for ethanol will have him and other West Texas producers of the fluffy fibre growing more corn this year.

 

In the past two years, corn prices have risen about 40 percent, or as much as US$1.50 a bushel, said Vaughan, a former president of the National Corn Growers Association. US corn growers were expected to plant as many as 90 million acres this year, up as much as 12 million acres from last year, he said.

 

"The economics have definitely changed," Vaughan said. "It's simply the price."

 

Demand for ethanol, a biofuel made from corn's starch, is surging as the country looks for alternatives to oil and ethanol plants pop up across rural landscapes.

 

On the South Plains, the world's largest contiguous cotton patch, producers could switch over as many as 750,000 acres to corn. Last year, 3.9 million acres were planted across the region.

 

Officials from the Memphis-based National Cotton Council declined Tuesday to say how many acres across the US might switch to corn this year. Planting intentions will be announced later this week at the council board meeting in Austin.

 

Those planning to switch acres to corn are finding they can get good prices beyond this year, Vaughan said.

 

"What's astounding about this market is it's not a one- or two-year deal," he said. "They can lock in prices through 2009 at very attractive levels. It's the perception that there is not going to be enough corn grown the next three years to satisfy markets."

 

It's not just the ethanol boom that has corn prices high. Livestock producers, including poultry and hogs, are trying to compete for corn.

 

"People are scrambling," Vaughan said.

 

Corn requires more water to grow than cotton, giving Panhandle cotton producers contemplating a switch an advantage over their South Plains counterparts. Water from the Ogallala Aquifer is more accessible in the Panhandle than farther south, Plains Cotton Growers (PCG) spokesman Steve Verett said.

 

But the winter has been wetter than usual for some Panhandle producers, prompting them to stay with cotton because it would make the best use of the water.

 

That's part of why Wes Spurlock, a farmer in Stratford in the far northern Panhandle, is sticking with cotton. Three years ago he wasn't growing any cotton; this year he'll plant about 2,400 acres.

 

"I'm not being tempted to going back to corn on this deal," said Spurlock, who still grows some corn but has moved away from irrigated wheat to grow cotton. "I look long-term and I set the programme up, and it's working."

 

PCG officials said fewer cotton acres could bring a price increase. Production and use of cotton worldwide has been about even in recent years, so a downturn in production could shorten supplies.

 

"That could be a positive and sort of bring the price back up a little," PCG spokesman Roger Haldenby said.