December 1, 2006

 

US corn to reach its highest level in 60 years

 

 

The ethanol industry's growing appetite for corn has pushed prices for the grain to their highest levels in a decade amid a surge that agricultural experts say could lead farmers next spring to plant their largest corn crop in 60 years.

 

Farmers who plant more corn in 2007, however, would be betting that the nation's burgeoning ethanol industry won't go bust and oil prices stay high, keeping up demand for the corn used to make ethanol, said Chris Hurt, a Purdue University agricultural economist.

 

Corn producers would have a wonderful time. However, they also feel apprehensive as booms often do not last, said Chris Hurt, a Purdue University agricultural economist.

 

The US expects to have some 150 new ethanol plants.

 

According to some experts, the picture is bigger than ethanol. It has to do with exports to other countries and those demands have generally been up. According to Hurt, livestock feedings that utilise several bushel of corn in the country and the ethanol would push up the demand. Increased demand would fetch higher prices to generate higher acres. With a growing amount of corn being diverted from food products and livestock feed toward ethanol production, per-bushel prices have increased about US$1 since mid-September.

 

Higher corn prices could boost Indiana farmers' incomes between 30 percent and 50 percent this year, with even higher increases possible in 2007, according to Hurt.

 

Despite a high corn price, farmers expect fuel, fertiliser and chemical suppliers to charge more for their products in response to the higher grain prices, and for cash rents for land to also rise.

 

Hurt predicts next year's average farm price for a bushel of corn to be US$3.40, which would eclipse the current record of an average US$3.24 price set during the 1995 marketing year.

 

He said that next year American farmers could plant up to 89 million acres of corn, about 10 million more acres than this year. That would be the largest US acreage planted in corn since 1946.

 

According to Gary Schnitkey, a farm financial management specialist at the University of Illinois, the first clear indication of how much more corn farmers would plant in 2007 would only come in March when the USDA releases a spring planting report.