September 4, 2006

US farmers jubilant about higher corn demand

There has never been a better time to plant corn in the US, analysts in the Great Plains and Mid-West are saying as dozens of ethanol plants sprung up in the region in barely less than a year.

More than three dozen ethanol plants are under construction or expansion, according to the Renewable Fuels Association and nearly 100 are already in operation.

Corn for ethanol is expected to account for a quarter of corn production, rising from 12 percent currently, according to a USDA report released earlier this year.

America would probably need 5 to 6 percent more corn as soon as next year, Darrel Good, a corn analyst from the University of Illinois said.

Many of those extra acres could come from more farmers breaking traditional crop rotation patterns and planting corn on the same ground corn was grown on this year, a procedure known as corn-on-corn. The move would mean more fertiliser needs, and better seed requirements.

Using a US per bushel benchmark price for soybeans, Good reasoned that the break-even price for corn would be about US$2.40 per bushel. Prices above that favour growing more corn while prices below favour soy.

However, farmers do need to be cautious. Recent abundant crops have left a surplus in storage and a decline in exports could help meet ethanol's demands, he said.

Even so, short-term demand for more corn to feed ethanol plants is evident. For an industry whose main complaint has been producing too much and getting too little, the change is welcome.