| Remember when you couldn’t give corn away? The government tried; they called it the Payment in Kind or PIK program. We had so much corn and it was so cheap that the USDA gave it away in lieu of real money. Today, however, there are new markets for corn popping up all over the place. Today the professional worrywarts are nervously fidgeting and asking in low voices: Will we have enough?
This has all come about as a result of the meteoric rise of corn to superstar status. Desperately looking for an answer to the energy crises that they ignored for decades, political leaders have chosen corn-based ethanol as the solution to our oil addiction. As a result, massive amounts of public and private resources are being poured into ramping up ethanol production and stimulating ethanol demand. This has caused a huge increase in the amount of corn used for ethanol. In 2002 only 996 million bushels of corn went into ethanol production. This year that figure will top 2.15 billion bushels.
Two things have happened as a result of this growth in ethanol demand: the price of corn has gone up, and people have started worrying about the price of corn going up. Frankly, I have not heard too many corn farmers worrying about the price of corn going up, most of them are saying: It is about time. After decades of low prices and government policies that only made things worse, corn growers may finally get what politicians have been promising them for so long, a profit from the marketplace.
In Indiana, for example, there are 10 new ethanol plants that will come on-line in the next two years. All will be looking to buy corn locally, about 35 million bushels annually for each plant. In addition the State Department of Corrections has just announced they will start heating four of their prisons with corn, which they want to buy locally, an estimated 1.6 million bushels. Add to this the goal of the state to double hog production, which means a lot more hogs hungry for, yes, more corn.
Does this mean Indiana is going to run out of corn? No, Indiana produces more corn than it can use and exports a good deal of it to Ohio, the Southeast, and the export market.
This development will, however, significantly change the Hoosier grain market and will mean a lot more Indiana corn will be staying at home. It also means Indiana corn growers will make some money.
Yet changes like this do require prudent study, which state officials are quietly doing.
Yet, to hear some folks talk, you would think profitable corn prices were a bad thing. In a recent Agriculture Online analysis, the question was raised: What if we have a drought? Gee, isn’t that what parts of Illinois and Indiana had last year, and we still produced an 11 billion bushel crop. With proper policies and planning, the U.S. corn crop will be large enough and reliable enough to meet the increasing demands of a food and energy hungry world.
Corn’s golden age is likely to be short lived. In the next 10 years or so ethanol production will move to other technologies such as switchgrass and biomass.
In the meantime, world food demands may be strong enough to keep the demand for corn strong, which it will need to be because at the same time corn production will continue to increase with advances in seed technology and production efficiencies.
Now that the world has discovered the power of the golden grain to feed and power the world, I hope they will continue to place a high value on the grain and the people who produce it.
This farm news was published in the June 14, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee. |
