By Sam Kirkland, The Republic
skirkland@therepublic.com
The price of corn in Indiana has roughly doubled in the last year, a trend agriculture experts attribute to increased demand due to ethanol production. Corn was trading at $4.10 per bushel last week, up from $2 per bushel on June 20, 2006, said Gary Fischer, grain merchandiser at Premier Ag.
Soybean prices have risen too, from $5.65 per bushel a year ago to more than $8. But those prices can be deceiving, Fischer said, because input costs for crop farmers - fertilizer, seed, cash rents - also have risen.
Soybean demand is growing with advances in bio-diesel technology - but at a slower rate than corn, Fischer said. Demand for corn has risen in part due to dry weather, but the majority of the increase is due to ethanol demand.
"Day-to-day fluctuations are purely weather-driven," said Bartholomew County farmer Shane Meier. "Long-term, the back-end of the market is being supported by ethanol production." Record harvesting
Last year, Americans planted 78.3 million acres of corn and harvested 10.5 billion bushels. In 2007, the Agriculture Department predicts U.S. farmers will plant 90.5 million acres and harvest a record 12.2 billion bushels. "In the last year we've seen a huge increase in the number of ethanol plants," said Corrine Alexander, assistant professor and Extension specialist in grain marketing at Purdue University. Alexander said cash rents go up for farmers who do not own their land as demand causes crop prices to increase. Ethanol demand has driven up the prices corn farmers spend on fertilizer and seed as well. Between July 2006 and January 2007, ethanol capacity in the U.S. rose from around 7 billion gallons per year to 11 billion, Alexander said. According to Renewable Fuels Association, two ethanol plants exist in Indiana, with five more under construction. Meier said the yield potential for corn has skyrocketed. "It just becomes a higher-stakes game," he said. Tough on livestock Bartholomew County farmer Albert O'Connor said the high demand for corn has hit him hardest with his livestock. As of Jan. 30, Purdue's Department of Agricultural Economics expected a 20 to 25 percent increase in crop revenues in 2007; for livestock, however, the department predicted a 30 to 40 percent decrease because of the cost of corn-based feed. "We've got very happy crop farmers, and very unhappy livestock farmers," Alexander said. She said corn must be rationed through pricing because of demand driven by large number of consumers, livestock farmers and ethanol plants. Retail consumers so far have escaped any significant impact on grocery prices. The price of a box of cereal, for example, is affected little by corn prices and more by cost of packaging and merchandising, Alexander said. The increased cost to livestock farmers has driven up Indiana egg prices more than 200 percent, according to the U.S. Department of Agriculture. Consumers, too, are seeing higher egg prices at grocery stores because unlike corn, eggs undergo very little processing before they reach the grocery stores. Meier said the idea of corn prices doubling can be misleading to a farmer because cash rents, fertilizer and seed are all more expensive for farmers. "There's just a lot of variables," he said. "Saying the price of corn has doubled is not really accurate."