OT: Corn: The Inflation Crop ** Or - We Can't Win For Losing

[Guest guest]

Corn: The Inflation Crop

 

The U.S. is set to report a jump in acreage planted as farmers feed

the ethanol machine. One byproduct: rising food prices.

 

By Jeff Cox, CNNMoney.com contributing writer

March 28 2007: 7:20 AM EDT

 

NEW YORK (CNNMoney.com) -- It's no secret that the rush to ethanol and

other alternative fuels has made corn the rock star of the Farm Belt.

 

That newfound prominence has big implications for the nation's

economy, experts say. Soaring corn prices are pushing up the tab for

everything from candy to corn flakes, moribund land values have jumped

in many Midwestern farming communities and the crop has become the

lynchpin for the budding $40 billion ethanol industry.

 

Prices for corn have doubled during the last two years, a trend that's

pushing food prices higher.

 

With corn farmers now getting $4 a bushel for their crops - double the

price just two years ago - corn's become the crop of choice for farmers.

 

And with the government's release Friday of a key report likely to

show a jump of 11 percent or more in the amount of acreage farmers

plant with corn this year, the 7,000-year-old crop will remain front

and center in the eyes of economists and millions of other Americans.

 

Bush, automakers pitch ethanol.

http://money.cnn.com/2007/03/26/news/economy/bush_fuel.reut/index.htm

 

" It really is a bit of uncharted territory, " said Christopher Hurt, an

economist at Purdue University, referring to the vast increase

targeted for corn production. " We've never seen a year where we've

needed to shift so many acres into corn because of a dramatically

large increase in demand for the commodity. "

 

Corn is the main ingredient in U.S.-made ethanol, the biofuel the Bush

administration hopes will start to wean the United States away from oil.

 

President Bush has set to reduce gasoline consumption 20 percent the

next 10 years.

 

Last year some 2.1 billion bushels of corn produced ethanol at 106

plants nationwide. That number is expected to jump to 3.5 billion

bushels this year as dozens of new plants come on line or get

expanded, according to the Renewable Fuels Association.

 

As corn output jumps, farmland devoted to other crops will drop.

Acreage devoted to cotton, for instance, is expected to show a 14

percent decline from 2006, according to the National Cotton Council.

Soybeans, wheat, barley, oats and alfalfa also will be displaced.

 

The corn phenomenon will be felt in the market in a variety of ways.

 

The high demand for corn, which accounted for about 10 percent of the

$305 billion farm industry last year, will push food bills up faster

than the overall rate of inflation, economists say. That's because

corn and corn-based sweeteners are used in so many foods and soft drinks.

 

Meanwhile, farmers benefiting from higher prices for corn - and higher

land values - could also get higher prices for other crops that corn

has displaced.

 

" I think the probability now is very large for 2007 and 2008 that

price increases in the food and beverage sectors are going to outpace

the general inflation rate, " said Hurt, who predicted food prices will

rise 5 to 7 percent in each of those years compared to the norm of

about 3 percent.

 

" Energy has been the bigger component of inflation these past two

years, while food helped to moderate that. Now you have a scenario

where food and beverage are going to be leading inflation. "

 

Most economists are predicting the U.S. will say farmers are planting

some 88 million acres with corn this year, up from 78 million in 2006.

The Department of Agriculture is due to release its annual crop survey

on Friday. March is a pivotal month for the survey because it's when

farmers announce their planting intentions. Corn prices are expected

to stabilize around $4 a bushel, up 20 percent from last year and a

100 percent spike over 2005.

 

But into each crop's life a little rain must fall, and too much

precipitation could spoil corn's reign as king of the crops.

 

A wet spring would delay corn planting. A shorter growing season would

cut output and could cause nasty swings in prices. A spike in prices

would hurt the ethanol industry, which is depending on stable costs.

 

A study at Iowa State University several months ago pegged at $4.05 a

bushel the maximum price that ethanol plants could pay and remain

profitable. Any rise beyond that would greatly reduce the incentives

to build new plants and make ethanol, sending the corn industry and

the U.S. energy policy into a dual tailspin.

 

Surging corn prices tighten ethanol financing.

http://money.cnn.com/2007/03/21/markets/ethanol.reut/index.htm

 

Mark Schultz, an analyst at Northstar Commodity Investment Co. in

Minneapolis, believes that excessive rainfall is the only thing that

can slow down the corn market. " The demand continues to get stronger

for ethanol and that's going to continue on. We don't see anything

slowing that down at the present time, " Schultz said.

 

But he's also watching other effects of corn's growth, and notes that

the increase in corn prices has meant less feed for livestock. Cattle

weights have dropped 10 to 20 pounds during the past year, he said.

Experts disagree on whether the falling cattle weights will lead to

higher beef prices.

 

William Plummer, a commodities trading adviser at Wextrust Capital

based in Chicago, said he is bullish long-term on corn prices.

 

" I don't think we can ramp up production of agricultural products fast

enough to compensate for the growth of ethanol facilities in the

U.S., " he said.

 

" This price level that we're looking at right now is going to be on

the low side or certainly the medium-low side of where we're going to

be. We're not going to see corn under three bucks unless there's some

sort of catastrophe. "

 

© 2007 Cable News Network LP, LLLP. A Time Warner Company

 

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From The Wall Street Journal Online http://www.WSJ.com

 

Big Corn Crop May Not Curb Prices

 

By Lauren Etter and Bill Tomson

 

Strong demand for ethanol and poor spring weather could keep corn

prices high over the next few months, even though the government

estimated Friday that this year's corn crop could be the largest it's

been since 1944.

 

Fueled by a booming demand for corn-derived ethanol, corn farmers

across the nation are expected to plant 90.5 million acres of corn

this year, according to the U.S. Department of Agriculture's Planting

Intentions report. With projected yields at 152 bushels per acre, the

final corn harvest could amount to the largest on record, according to

the National Corn Growers Association. (Clipped)

 

2007 Dow Jones & Company, Inc. .

[Guest guest]

Butch Owen wrote:

> Corn: The Inflation Crop

>

> The U.S. is set to report a jump in acreage planted as farmers feed

> the ethanol machine. One byproduct: rising food prices. <snipped>

>

Thanks for posting this Butch,

 

I've read a bunch and watched several programs about ethanol production.

 

Wanna know whats really goofy about this ... corn really is not such a

great crop to use for the production of ethanol. As an ethanol

production crop it is not energy efficient and it is more time consuming

than for example using sugar cane. It also produces less ethanol than

other crops, such as sugar cane do.

 

What we should be doing is more research into things like Gasification

and the production of ethanol from cellulose biomass waste, landfill

gas-to-energy, and animal dung bio-gas. Each of those options make

energy from trash and waste, which as the old saying goes " kills two

birds with one stone " .

 

As my mentor taught me ... work smarter, not harder

 

 

*Smile*

Chris (list mom)

http://www.alittleolfactory.com

 

 

 

>

[Guest guest]

Corn is also not such a great crop for feeding animals, especially cows.

Animal products from corn-fed cows are lacking in CLA,

Conjugated Linoleic Acid..

The lack of CLA may be one factor (among many) in the obesity epidemic.

See http://www.mercola.com/beef/cla.htm

 

We'd be better off growing food grains directly for people and eating less

meat. I said less, not none. Just make the meat we do eat grass-fed.

 

And how about growing hemp and kenaff for paper? Let the woods be forest,

instead of tree plantations?

 

Another fun topic, fresh from " The Economist " : there is a shortage of certain

basic materials for solar and wind power generator. The basis is silicon, sand,

of which we have plenty. We need more factories to produce whatever poly

(don't have it handy, long word) form of it does the trick, Jobs, jobs, jobs!

 

Come on planet, we can DO this!

 

Ien in the Kootenays

http://freegreenliving.com