By Charles Abbott 36 minutes ago
WASHINGTON (Reuters) - U.S. farmers plan to cash in on the fuel ethanol
boom by planting the largest area to corn in 63 years, potentially yielding
a record crop and calming fears that renewable fuels will steal grain needed
for food and feed, the federal government said on Friday.
At the Chicago Board of Trade, corn futures prices plunged the daily
trading limit of 20 cents a bushel on prospects for a huge crop. Prices for
this year's soybean crop fell as much as 33 cents a bushel, and wheat was
down 27 cents a bushel.
Yet even with record output, this year's corn crop could sell for a
record $3.50-$3.60 a bushel at the farm gate, market watchers said. Corn
prices on the cash market have doubled since last fall due to explosive
growth in the ethanol industry, driving up costs for cattle, dairy, hog and
Based on a survey of 86,000 farmers earlier this month, the Agriculture
Department projected corn (maize) plantings of 90.454 million acres, which
would be the largest acreage since 1944. With normal weather and yields, the
harvest would be 12.5 billion bushels -- 700 million bushels more than the
record set in 2004.
"With a medium yield, we could get just about enough corn in the year
ahead," said private consultant John Schnittker. USDA forecasts corn usage
of 12.3 billion bushels in 2007/08, including 3.2 billion bushels for making
ethanol, up 1 billion bushels from the 2006 crop.
Farmers could collect nearly $46 billion with a mammoth corn crop, said
Ann Duignan, an analyst at Bear Stearns, "which in our view is positive" for
sales of farm equipment.
The chairman of farm equipment maker Agco Corp., Martin Richenhagen, said
when farmers are flush with cash, "they often then invest in equipment."
The Renewable Fuels Association, a trade group for alternative fuels,
said with high yields the U.S. corn crop could hit 13 billion bushels. "Such
a harvest would meet the needs of all the sectors that rely on it," said RFA.
There are 114 ethanol distilleries in operation across the country which
produce ethanol from corn. Production is projected to exceed 6 billion
gallons this year compared with 4.89 billion gallons in 2006, and some 3
billion gallons in capacity will be added in 2007, the group said.
Planting intentions are months away from actual harvests.
"The weather is going to drive it all," said Tom Buis, president of the
National Farmers Union, pointing to the uncertainties of the growing season.
Growers told USDA they will cut back on soybeans in the Midwest and on
cotton and rice in the South to sow more corn. Soybeans are forecast at
67.140 million acres, the smallest area since 1996, while upland cotton
would be the smallest since 1989 at 11.855 million acres. Rice, at 2.64
million acres, would have the smallest seeded area since 1987.
Farmers say they will plant 60.3 million acres of wheat, up 5 percent
USDA forecasts only a modest rise in food prices this year, but said,
"With high corn prices increasing feed costs, beef and poultry price
increases should begin to accelerate in 2007."
Schnittker said a large corn crop this year would stabilize food prices
Iowa, traditionally the No. 1 corn state, would plant 13.9 million acres
this year, up 1.3 million acres from 2006, USDA said. Illinois would plant a
record 12.9 million acres of corn, up 1.6 million acres, while cutting
soybean plantings by 1.4 million acres, the largest decline in the country.
In morning futures trading at the CBOT, corn was offered at $3.74-1/2 a
bushel, soybeans traded at $7.67-1/4 per bushel, and wheat was at $4.38-1/2