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Economist: Corn acreage for 2007 appears historic
WEST LAFAYETTE, Ind. — As farmers look toward the 2007 crop season, many are blurting out a four-letter word: Corn.

The expanding biofuels industry and high export demand adds up to what could be the largest United States corn acreage in several generations, said Chris Hurt, Purdue University agricultural economist. Hurt predicts corn prices will eclipse $3 a bushel for the 2007 marketing year and could threaten the 1995 record of $3.24 a bushel.

“There’s no question at this point that we’re going to need a massive increase in corn acreage for 2007,” Hurt said. “That increase is driven primarily by ethanol, but we also have very strong export demand. That export demand is mostly driven by the fact that there’s a fear that corn supplies are going to be very tight in the United States and that prices will be much higher.

“In terms of acreage, I’ve been suggesting that we may have to push acreage up to 88 million to 89 million acres of corn. That would be a 10 million acre increase from 2006 and would put us at the highest acreage planted to corn in the United States since 1946. We’d be looking at a 60-year phenomenon.”

American farmers committed so many acres to corn in the 1940s to help feed European allies during and after World War II. In subsequent years, the development of higher yielding corn hybrids and other agricultural advances made it possible to grow more corn on fewer acres. In addition, crop rotations - where corn is grown on land one year and soybeans the next to lower the risk of soilborne diseases, insects and weed infestation - began to take hold.

This year farmers planted about as many acres of soybeans as corn: 75.6 million acres and 78.6 million acres, respectively. In Indiana, the acreage totals were 5.7 million for soybeans and 5.5 million for corn.

Nationally, corn production for 2006 is forecast at 10.9 billion bushels, at an average yield of 153.5 bushels per acre, according to the USDA.

About 2.1 billion bushels of the 2006 corn crop is going into ethanol production at the 106 ethanol plants across the country. By the end of 2007, another 1.4 billion bushels of corn could be needed to feed 53 new or expanded ethanol plants, including five new plants in Indiana, according to the Renewable Fuels Association. The more than 150 plants could be capable of producing nearly 9 billion gallons of ethanol per year.

To put that number in perspective, the United States uses about 140 billion gallons of gas a year.

“Our corn utilization next year could approach 12.5 billion bushels,” Hurt said. “We can feed a little bit off of our inventory, but no more than 300 million bushels. So we’ll probably have to produce about 12.2 billion bushels of corn next year.”

The most corn ever produced in the United States was 11.8 billion bushels in 2004.

With corn demand running high and 2007 production still a question mark, Hurt believes corn prices could go through the roof. “It is very early to be projecting prices for 2007 in that so many events, including harmful weather and international events, can affect those prices very strongly,” he said.

“But right now I’m using corn prices in the $3.40 per bushel range for the ’07 crop. For the 2006 crop year, the USDA is using $2.60 a bushel, so I think talking about $3 or maybe higher than $3 a bushel is not out of the question for 2007.

“Now, many things will have to unfold for that to happen. One of those is that the ethanol industry continues to run at near its capacity. And that assumes, of course, that oil prices will stay at least above $50 a barrel.”

Should farmers follow the economic trends and dramatically increase their corn acres, they’ll have to grow fewer acres of other crops.

“As we look at that huge potential increase in corn acreage, we have to ask, ‘Where will that come from?’“ Hurt said. “We’ll probably see some reduction in cotton acreage in the southern United States that will go over to corn acreage. Some land that is best adapted for sorghum could be planted to corn instead. And, throughout the northern Plains, spring wheat may be down some and we could see more corn acreage.

“But those are fairly marginal acreage numbers - maybe 1 million or 2 million acres. Most of those 10 million additional acres of corn will have to come from here in the Midwest. In order to get that acreage, it largely has to come out of soybean acreage.”

Planting corn for a second straight year on the same land would disrupt crop rotations, which could mean reduced yields, Hurt said. Still, the markets say grow corn, he said.

“The 2007 crop futures market for corn and soybeans suggests that producers will get a high enough return, even if they have yield reductions for corn planted on corn land,” Hurt said. “Obviously, crop producers are excited and anxious to begin planning their 2007 planted acreage.”

This farm news was published in the Nov. 8, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.

11/8/2006