Higher corn prices: They'll grow on you

Todd Hutson, agriculture and natural resources extension educator for the Porter County office of the Purdue University Cooperative Extension, said in the short-term farmers may reap the financial benefits from the bump in prices.

"Long term if it stays this way, it can dramatically change agriculture here in the United States," Hutson said.

Corn futures rose at the end of trading last week, amid concerns that cold and wet weather next week could delay early corn planting, analysts said.

Chicago Board of Trade May corn gained 6.75 cents to close at $3.66 a bushel, July corn settled 6.5 cents higher at $3.78 a bushel, and December corn rose 6.25 cents to finish at $3.8675 a bushel.

Higher corn prices may pressure other agricultural operations. Livestock producers may take a beating if feed prices continue to climb. The distiller's grain, a by-product of ethanol production intended for use as animal feed, does not work with all livestock such as poultry and pigs, Hutson said.

Escalating feed prices may mean some livestock farmers in Indiana either reduce their herds or flocks or relocate them.

The lure of potential profit may also bring more farmers into the area. Hutson said he has had more inquiries than usual from people interested in renting land to farm. It is not an uncommon practice in the area, but due to the hype about ethanol, more people appear ready to give it a chance.

There is no shortage of corn in the region right now to fill the needs of Iroquois Bio-Energy Co. LLC in Rensselaer, according to plant manager Keith Gibson.

"It's still available in the area, but it's more expensive," Gibson said. The ethanol plant bought most of its corn last year before the price jumped, but still purchases about one-third on the open market.

"Everything is coming from this area," Gibson said. The plant is on target for its 40 million barrel per year production goal.

He said the plant is finding local corn supplies more than adequate. "We aren't in fear of running out of a corn supply," he said.

Local developers will likely not run out of access to farmland for development either.

David Gring, director of sales for Harvest Homes in Valparaiso, said he doubts higher profits for farmers will decrease the amount of land available in the region for development.

Gring said if there is a piece of farmland that is appealing to developer because of its location, topography and amenities, the developer will definitely pursue the landowner. He said there is a possibility the situation may raise the price per acre for the land.

"In time, there could be a correlation, but I don't think there is right now," Gring said.

Right now, all the what-ifs focus on an increasing demand that promotes a continued high per bushel price for corn with farmers reaping the benefits.

That higher profit margin for farmers may be short-lived as suppliers in turn increase their prices, Hutson said.

Planting problems or drought could also dramatically effect the outcome.

He said one season is too short a time to make any major predictions as to what will happen to the industry in the long term.

He said he is taking a wait-and-see approach.

"It will be just a wild ride this year," Hutson said.

Ned Lyons, who owns a farm in Rensselaer, will be selling all his corn to Iroquois Energy this year.

Lyons, who is an investor in the plant, said he usually grows 600 acres of soybeans and 600 acres of corn on his farm each year, rotating the fields in which the crops are grown.

For the 2007 growing season, he's planting 900 acres of corn and 300 of soybeans.

"It's the possibility for an improved profit with the higher corn prices," Lyons said.

Until last year, Lyons said he grew food grade corn, but gas prices to haul the corn to Hammond began to cut too deeply into his margins.

This year, he expects things to turn around completely.

He already has his crop sold forward at a good price above $3 a bushel and is looking to Mother Nature to cooperate to keep things on track.

Fields now are too wet for the tractors to begin planting, but the window of opportunity is still open wide.

Lyons said he typically begins planting around April 20. Crops need to be in ground by June 5 to qualify for crop insurance benefits if something were to go wrong.

"It's a different ball game every year have to adjust to it and role with the punches," Lyons said.