With US ethanol boom, corn is king this season

Farmers plant most acreage since 1944, hoping to cash in while corn demand is high.

By , Staff writer of The Christian Science Monitor

Several years ago, Billy Joe Ragland planted nearly all cotton on the 5,200 acres he farms with his son in Bentonia, Miss., just north of Jackson.

This year, 4,200 of those acres will be corn.

"Everybody in this area is doing a lot more corn," he says. "If we have a decent year, I think we have a chance to maybe make a few dollars for a change."

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With corn prices soaring due to the demand for ethanol, the US is looking at what may be its largest corn planting since World War II, according to US Department of Agriculture statistics. Some 90.5 million acres are expected to be planted – 15 percent more than in 2006.

If farmers get the yields they'd like – always a weather-dependent proposition, and one that may be tough this year with the planting delayed in many states because of a cold, rainy spring – it could be a banner year for many corn growers.

Still, there are downsides. The prospect of so much corn is already starting to push prices down, there's an environmental risk to planting more marginal land with such a fertilizer-intensive crop, and many farmers aren't quite sure where they'll store it all come harvest time.

"With that big a crop coming at us, we're going to have some storage problems, we're going to have some transportation problems, we'll have a little bit of everything coming at us," says Dan Zwicker, a market analyst with the Illinois Farm Bureau. But, he adds, "corn prices are such that it's hard to resist if you've got land that's capable of doing corn on corn [corn two years in a row]," rather than replenishing the nitrogen in a previous cornfield's soil by planting soybeans.

Mr. Zwicker and other economists note that the USDA's 90.5 million-acre figure came from a March survey of planting intentions when corn was trading at over $4 a bushel. This week, corn for July delivery was trading at $3.66 on the Chicago Board of Trade.

A wet spring that has delayed many farmers' corn planting complicates things further. At this point, around 53 percent of the corn crop has been planted, according to the USDA, compared with 67 percent at this point last year.

The later the crop goes in the ground, the harder it is for farmers to get as many bushels of corn per acre out of their land.

"In all likelihood, that [USDA estimate] will be reduced by at least two to three million acres when all is said and done," says Terry Francl, a senior economist with the American Farm Bureau Federation. "The truth is, there are a lot of decisions and issues involved in terms of farmers making a switch from soybean acres to corn acres."

Still, there's no doubt that many farmers are trying to cash in on the corn bonanza, typically by planting fields where they'd normally plant soybeans or wheat or, in the South, cotton. The USDA estimates the farmers will plant 20 percent fewer cotton acres this year, and soybean acreage will drop by 11 percent.

That much corn worries some conservationists. The crop requires more fertilizer than most, and is responsible for a lot of the water contamination near farmland.

With such a large corn crop, "we're going to be applying a lot more nitrogen," says Scott Faber, farm policy campaign director for Environmental Defense. "Unless we provide farmers with the right tools and incentives, we'll lose a lot more nitrogen than we normally lose from our farms, and have it wind up in rivers, lakes, and bays. And without the right safeguards, we'll lose ground on some of the [environmental] gains we've made for resources like the Chesapeake Bay, the Great Lakes, and the Mississippi River."

Mr. Faber advocates incentives to encourage farmers to adopt technologies that apply fertilizer to the soil with more precision, so they don't put in more than they need, and to change the timing of their applications so that more of it gets absorbed and doesn't run off.

Water usage could also increase in Western plains states where corn needs to be irrigated, says Dennis Conley, a professor of agricultural economics at the University of Nebraska in Lincoln. But even with the increased planting, Professor Conley doesn't expect supply to outstrip demand, unless the price of crude oil was to fall significantly and lessen the appeal of ethanol.

"Longer term, it looks like ethanol is here to stay," he says. "It's causing a structural change in the feed-grain-livestock economy…. Even with increased supplies, some are projecting we'll need another big increase in the corn supply next year."

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