August 28, 2006

Corn prices might draw more US acreage in 2007

Corn prices may entice farmers to plant more acres to the crop in 2007, says a study from the University of Illinois Extension.

"Given a US$6 per bushel soybean price and soybean yields above 45 bushels per acre, breakeven corn prices range from slightly above US$3 for relatively low corn yields to about US$2.50 for relatively high corn yields," Gary Schnitkey, an extension farm financial management specialist, and Darrel Good, extension marketing specialist, said in the study released this month.

"Current 2007 price projections are in the US$2.70 to US$2.80 per bushel range for corn. Hence, some farmers may find switching to more corn profitable for the 2007 production year," they said.

The growth in the ethanol industry suggests that farmers in the Midwest will need to plant more corn to meet demand, Schnitkey and Good said, but that increase in corn acreage will come at the expense of other crops, particularly soybeans.

"As a result, the profitability of corn must exceed that of soybeans to entice farmers to plant more corn," they said. "This enticement generally comes in the form of higher corn prices relative to soybean prices."

However, the authors of the study did caution that breakeven prices for corn will vary.