Farmers to plant more corn to meet ethanol demandby Mark Steil, Minnesota Public Radio
The amount of corn U.S. farmers intend to grow surprised even the experts when the Agriculture Department released it's spring planting outlook today.
St. Paul, Minn. — USDA officials predict farmers will increase production 15 percent or 12 million acres, mainly because of ethanol demand. Minnesota farmers intend to increase corn acreage 8 percent.
The news caused corn prices to drop sharply. That's an immediate concern in Minnesota, where the corn crop is worth nearly $4 billion.
The spring planting outlook means U.S. farmers plan to devote more acres to corn than in any year since World War II.
During the war years, grain was essential to feeding the troops and our allies. This year more corn is needed to make a fuel, ethanol.
That demand has helped corn prices double over the past year. Grain analyst Mark Schultz of Northstar Commodity says the USDA report means farmers may produce enough grain to end concerns about short corn supplies. He says that likelihood was increased when the Agriculture Department also announced that there's more corn in storage from last year's crop than previously thought.
"Therefore we're going to have more corn left-over than what the trade was previously thinking," says Schultz. "So when you couple that with more corn acres being planted now you run the risk that the corn market is over-valued and likely to continue more to the downward price decline."
As soon as the USDA information reached grain traders they started bidding corn down. Corn prices on the Minneapolis Grain Exchange fell as far as they could in one day's trading, down 6 percent, or 20 cents a bushel, the daily limit. Prices for other grains also fell. Farmers reacted.
One place they talked was on internet bulletin boards. The price drop was disheartening news. One posting hinted the USDA numbers demonstrated that greed had surfaced in agriculture; it said "looks as if you king corn farmers have killed the market".
Another popular question was whether the federal report would change spring planting plans to less corn and more soybeans. One Minnesota farmer planned to do exactly that writing "damn straight it will change my corn acres."
Southern Minnesota farmer Bob Braun is more cautious. He says he and his brothers still intend to increase corn acreage this year by about 14 percent. He says they've already spent money on those plans.
"We've already purchased all our inputs for those acres. We have the seed bought here on the farm. We have all our fertilizer and chemicals paid for so we got those prices locked in. And we also have the grain marketed either with forward contracts or at least with options," says Braun.
Braun says the only weather will change his planting plans. He says if wet field conditions delay corn planting, he and his brothers may switch some acres to soybeans.
One group of farmers who may be relieved with the USDA report are livestock producers. Rising corn prices have increased their feed costs. With corn prices headed down at least for now, the pressure of dealing with high feed prices will lessen. Lower feed costs will also help hold down meat prices at the grocery store.
- All Things Considered, 03/30/2007, 5:45 p.m.