August 22, 2006

 

US farmers hope ethanol boom will boost corn prices

 

 

Dozens of ethanol plants under construction across the US Midwest and the Great Plains will mean more demand for corn, and that likely will lead to higher prices and bigger profits.

 

"I happen to be more encouraged by what I see going on in agriculture now than anytime from the time I got involved in it in 1977," said David Kurtz, who farms about 800 acres of corn south-east of Urbana. "More demand for corn, it's very simple, it leads to higher prices."

 

More than three dozen ethanol plants are under construction or expansion, according to the Renewable Fuels Association. Add those to nearly 100 that are already producing and it's easy to recognize the need for much more of the gasoline additive's major raw material, says Darrel L. Good, a crop marketing specialist at the University of Illinois.

 

In fact, the portion of the US corn crop consumed for ethanol production is projected to rise from 12 percent in 2004/05 to 23 percent in 2014/15, according to a US Department of Agriculture report released earlier this year. American farmers grew about 11.1 billion bushels of corn last year.

 

"I think very quickly, maybe as soon as next year, we need another five million acres of corn, 5 to 6 percent more corn," Good says, assessing the nationwide need. "And maybe we need to add to that a little more in '08."

 

That means farmers, who already are beginning to think about next year's crops, need to decide now whether to plant more acres of corn, he said. Many of those extra acres could come from more farmers breaking traditional crop rotation patterns and planting corn on the same ground corn is growing on this year.

 

"If they're going to do corn-on-corn it implies maybe some more fall tillage, more fertiliser needs, more cash needs, difference in seed requirements," Good said. "You can't wait until the last minute to make all those decisions."

 

But farmers do have some time to be cautious, said Philip Shane, market development director for the Illinois Corn Growers Association. Recent abundant crops have left a surplus in storage and a decline in exports could help meet ethanol's demands, he said.

 

"The corn is there. It's just going to be shuffled and price is going to dictate that," Shane said.

 

Even so, short-term demand for more corn to feed ethanol plants is inevitable, and that will have farmers like Kurtz smiling.