March 2, 2007

 

Booming ethanol demand means more corn, fewer soybeans
 

 

Farmers in US state of Iowa are opting to grow more corn than soybean due to the expanding ethanol industry. 

 

Iowa land owner Don Elsbernd is one farmer that is now devoting two thirds of his 1,000-acre land into corn rather than splitting it evenly on soybeans as corn prices have reached to US$4 per bushel.

 

To produce enough corn for food, feed, and exports, and keep up with the demand for renewable fuels, as many as 10 million additional corn acres could be needed, according to industry estimates.

 

If that much additional corn were to be planted, it would be the highest level since 1946, when American farmers helped feed postwar Europe.

 

The National Agricultural Statistics Service said hard numbers on what farmers intend to plant won't be available until next month. But soybeans, which were planted on almost the same acreage as corn last year, stand to lose the most physical ground, especially in the Corn Belt.

 

Thanks to the likely drop in soybean production, prices for the legume have almost mirrored the rise in corn prices.

 

Bruce Babcock, director of the Centre for Agricultural and Rural Development at Iowa State University said soybeans would be lose more planting acres as its prices also shoot up.

 

Rick Ostlie, president of the American Soybean Association, predicts up to 5 million acres of soybeans could be replaced with corn. He believes it will be a short-term impact because "a lot of the land we grow soybeans on would not be suitable for corn."

 

Ostlie, who grows about 2,000 acres of soybeans in Northwood, North Dakota, said logistics will cause people to keep planting their soybeans.

 

Corn prices have climbed as high as US$4.08 per bushel recently. Last year at the same time, they hovered around US$2.22. Soybean prices also are climbing, with March soybean futures priced at US$7.59 compared to $5.87 a year ago, a 29 percent increase, Babcock said.

 

While corn costs more to produce because of higher seed, fertilizer, equipment, transportation and storage costs, fluctuating estimates show that corn can earn hundreds of dollars more per acre compared to soybeans, said Corinne Alexander, an agricultural economics professor at Purdue University. Much of the difference is because corn has a higher yield than soybeans _ an average of about 50 bushels per acre of soybeans compared to 150 bushels per acre of corn, Alexander said.

 

Also affecting farmers' planting choices are record-ending stocks of soybeans, about 595 million bushels this year, or about 20 percent of what the nation uses each year, Alexander said. Ending stocks on corn are only at 752 million bushels, or 6.4 percent of usage.

 

Ron Litterer, first vice president of the National Corn Growers Association, said he thinks corn acres could increase by as much as 8 million acres this year. Much of that will be a switch from soybeans to corn, but he said many in the industry also expect new crop technology to increase corn yields at a rate of about 2.5 percent per year.

 

The USDA says farmers were able to increase corn yields to an average 138 bushels per acre from 1996-2005, compared with 115 bushels during the previous decade. Some seed companies predict corn to reach more than 200 bushels per acre within 10 years.