''EUREKA!" The cry has recently sounded across the Corn Belt as the grain has rocketed to a historically high price, giving farmers the prospect of growing the farm economy's equivalent of "gold-on-the-cob."
The price of America's No. 1 crop has surged 70 percent in the past year as corn stocks fell to the lowest level in more than 20 years. The price of corn futures at the Chicago Board of Trade have jetted to the highest level in the 119-year history of the contract.
Before the corn harvest in October, corn shortages are likely to further hike prices and vex grain processors, livestock businesses, and other corn users, farm experts say. Even with a record harvest, stocks would probably not recover to accustomed levels until 1998.
A better than average harvest "still won't be enough to replenish stocks to a comfortable level and prices will stay pretty high," says Paul Prentice, president of Farm Sector Economics Inc. in Colorado Springs, Colo.
"The market will probably be on pins and needles for many months to come," says Roger Norem, senior analyst at AgriVisor Services Inc., a consultancy in Bloomington, Ill.
The meteoric price rise is a boon to farmers. At the close of trading last week, corn sold at an all-time high of $4.265 a bushel for delivery in May, 58 percent above the estimated break-even point of $2.70 per bushel.
Ultimately, Main Street consumers will foot the bill for the higher price. But the cost will be cushioned as corn passes down the line of production: The price increases of comparatively unprocessed items like milk and beef will be far higher than for breakfast cereals and soft drinks, according to agricultural economists.
The biggest losers from the high-flying corn price are the producers of beef, hogs, chickens, and other livestock.
Already, some turkey and chicken farmers in Ohio and Indiana are scouring the countryside for grain.
In order to reduce feed costs, beef producers are slaughtering cattle at an unusually high rate, says Gary Lohr, a consultant for the food and meat industry in Colorado Springs, Colo. A sudden surge of market meat will lower consumer costs. But once the "liquidation" expends itself, beef supplies will fall and prices will rise significantly next year, say the experts.
The US corn supply registered 3.8 billion bushels as of March 1, or 32 percent less than a year earlier, according to a recent report by the US Department of Agriculture (USDA). This is about 100 million bushels smaller than anticipated. Soybean and wheat stocks are also low compared to last year, down 13 percent and 15 percent respectively, according to USDA.
Corn stocks are paltry because of a disappointing 1995 harvest and robust exports, especially to South Korea, China, and other rapidly growing East Asian economies. Indeed, the price of corn leapt upward Tuesday after the USDA announced that despite the high price, South Korea has purchased 156,000 tons of the grain for delivery this year.
Unanticipated exports, speculation, and weather will all contribute to volatility in the price of corn. The newly passed Farm Bill - which will gradually curtail federal intervention in agriculture - will also open the way for greater price swings, say agricultural experts.
The market will eventually recover its balance as high prices spur higher production. Indeed, even Deep South farmers are aggressively planting corn. In Mississippi corn acreage this year has expanded 83 percent.
"Everyone wants to participate in the prosperity," says Neil Harl, professor of economics at Iowa State University in Ames.
"At such high prices for corn," says Mr. Prentice, "farmers will be planting it on their rooftops."