INDIANAPOLIS, Ind. — Corn prices dropped Friday after the USDA estimated a larger 2006 crop than analysts anticipated. Farmers may have to wait another year to see those prices increase much, Purdue University and Indiana agricultural experts said Friday during a crop briefing at the Indiana State Fair.

According to the USDA’s monthly crop production report released Friday and based on conditions as of Aug. 1, U.S. corn production is forecast at 11.0 billion bushels, down 1 percent from last year but up from last month’s estimate of 10.74 billion bushels. Yields are expected to average 152.2 bushels per acre, up 4.3 bushels from last year.

With this news, corn prices in Chicago fell the most in nine years with corn futures for December delivery dropping 14 cents to $2.4175 a bushel.

Greg Preston, director of the Indiana Agricultural Statistics Service, reported at the briefing that while Hoosier farmers have fewer corn acres to harvest than in 2005, production is forecasted at 893.5 million bushels in 2006, up 1 percent from last year.

“Indiana corn yields - at 167 bushels per acre - are expected to be close to record high,” Preston said. If realized, the yield will be up 13 bushels from last year’s average. The state’s record yield of 168 bushels per acre was set in 2004.

The higher yields are not going to add up to higher prices immediately, according to Chris Hurt, a Purdue agricultural economist. He predicted farm incomes in Indiana could be 40 percent to 60 percent lower than in 2005 with higher fuel and fertilizer costs.

“Hold on, hold on, hold on” to the crop was the advice he gave producers. He said that prices should get better next year, citing a number of new ethanol plants expected to go online in 2007.

Look for storage

With the larger than expected corn crop on the horizon, Preston said that grain storage may be an issue this year.

“Farmers should start thinking about where they’ll put all that grain,” he said.

Hurt agreed with Preston and added that there is already more corn out there than the market demands.

“There’s a real potential for a record corn yield,” Hurt said. “That is certainly very pleasing to our producers. We’re going to have at least one more shot of low prices this fall, and that’s because we have, on a national basis, about a 2 billion bushel carryover of corn. We have an awful lot of old crop corn that is not going to be utilized and will stay in storage.”

“The good news is that this year, on a national basis, we’re going to be producing about 11 billion bushels of corn, but we’re going to be using about 12 billion bushels of corn,” he added. “So we’ll be using up about a billion bushels of the surplus corn stock.”

Andy Miller, director of the Indiana State Department of Agriculture, said that his office feels that “a little carryover is not a bad thing” as Indiana becomes a bigger player in the ethanol industry. On Friday, state officials announced plans for Indiana’s 12th ethanol plant. “I’ve had more people asking me about corn, and that’s because of ethanol,” Miller said.

Ethanol’s potential

The growth of the ethanol industry in Indiana and nationally could mean that more and more of the state’s corn crop could be used to make fuel, according to Hurt.

He said that one ethanol plant operating currently could use 4 percent of the estimated 2006 corn crop and that number will grow as more plants start production.

“There are now four ethanol plants under construction in Indiana, which should be in production in mid-2007,” Hurt said. “With those, we move from 4 percent of our corn use for ethanol to 16 percent of the 2006 corn crop. When we get to 1 billion bushels of ethanol production, we would be using 40 percent of the corn we are expected to produce in 2006. That’s a big deal - from 4 percent to 40 percent of the corn produced in the state. That’s not a transition, that a revolution.”

Preston added, “There is reason that ethanol plants are settling here. They look at the potential yields and know that Indiana can produce the needed crop.”

The USDA crop report is available online at www.usda.gov/nass/PUBS