Farm Bureau speaker praises ethanol's impact
URBANA – Potential prices of both corn and soybeans depend heavily on what farmers do in their fields this spring.
Illinois Farm Bureau analyst Jim Gill, speaking to farmers attending the 95th annual Champaign County Farm Bureau meeting, linked planted acreage directly to market prices that got a jolt Friday when government crop counters reduced both the size of the 2006 crop and the size of corn stocks on hand in the country.
"Aren't these markets fun?" Gill said of corn prices that topped out at about $4 when markets closed Friday.
"It's an interesting time, a once-in-a-generation bull market. Surely this one should go on a couple of years if we keep on building ethanol plants. Ethanol's magic now. There are 100 plants in the U.S. now with 70 to 75 coming on board. That's a billion bushels of new demand.
"We needed this boost," he said. "For 13 years the price of inputs has gone up faster than the prices of our grain. Farmers have been breaking even with $2 corn, and they're almost to the breaking point."
Gill said he believes that 1973 is the year that compares most closely with what's happening now because of all the new demand created when the former Union of Soviet Socialist Republics jumped into the market. He said corn prices were about $3 a bushel that year.
Jim Esworthy, who's farmed near Ogden since 1970, also remembers those '70s boom markets.
"Beans were $10 a bushel in 1973," said Esworthy. "I hauled a load to the elevator and the beans were worth more than the truck."
He plans to plant about 10 percent more corn this spring in response to the markets.
Gill said he thinks the whole country will benefit from the trend toward renewable fuels, especially ethanol. "It doesn't take 160,000 troops to protect our cornfields," he said.
Gill also doesn't expect any serious weather issues this spring, but he said it could get dry later in the summer.
"It might be another dream season," he said.
Gill said if farmers plant an additional 4 million to 6 million acres of corn this spring to meet anticipated ethanol demand, he expects prices to stay in the $4 range.
If they plant about 8 million extra corn acres, prices will likely be in the $3.60 range and if they plant 10 million more acres, they'll be in the $3.25 range.
"Between now and planting, corn prices have to stay where they are now or they won't buy enough extra corn acres," he said.
On the other side of that equation, Gill predicts that if farmers plant about 5 million fewer soybean acres, prices will be in the $6.25 range. If they plant 7 million fewer bean acres, prices will be in the $6.75 range and if they plant 9 million fewer bean acres, they'll be in the $7 range.
Gill traced the ethanol boom to a key decision made in Congress that would hold transit systems liable for traces of MTBE, a fuel enhancer like ethanol but one made from petroleum, in municipal water supplies.
"That caused an instant shortage of ethanol," he said.
Dennis Riggs, who farms near Broadlands, said he just took a look at 10-year corn charts.
"When you look at them you see it's not a bad time to be selling corn," Riggs said.
He said he's not planning to change his 50-50 corn-soybean rotation to grow more corn, however.
"I plan on agronomics, not economics," he said. "And bean prices are rallying too. I probably won't plant something like flax though or start a livestock operation."