Ethanol Demand Drives 15 Percent Increase in Corn Plantings
April 4, 2007
High corn prices spurred by a surge in demand for ethanol production have led to a 15 percent increase in planned plantings of corn in the United States, according to the U.S. Department of Agriculture (USDA). The "Prospective Plantings" report, issued on March 30th by the USDA's National Agricultural Statistics Service (NASS), says farmers intend to plant 90.5 million acres of corn this year—an increase of 12.1 million acres—resulting in the largest area planted for corn since 1944. According to the Renewable Fuels Association (RFA), that acreage should yield more than 13 billion bushels of corn, which will provide "ample corn supplies to economically meet the needs of all the sectors that rely on it." Farmers will have some catching up to do, though, since the "Grain Stocks" report, also issued on March 30th, notes that corn stocks are down by 13 percent—more than 900 million bushels—from this time last year. See the press releases from the NASS and the RFA and the "Prospective Plantings" (PDF 152 KB) and "Grain Stocks" (PDF 91 KB) reports. Download Adobe Reader.
The increased corn plantings will mostly cut into the acreage planted for other crops, including soybeans, cotton, and rice. U.S. farmers plan to plant 67.1 million acres of soybeans, down by 8.3 million acres in 2006. But fears that farmers would move en masse to put idled lands into production for corn have so far proved unfounded. In early March, the USDA noted that corn demand had a minimal effect on enrollments in the Conservation Reserve Program (CRP), which sets aside farm land for environmental reasons. Out of 27.8 million acres of land in the CRP, 4.6 million acres of land will exit the program over the next three years. Only 1.4 million of those acres are located in major corn-producing states. See the USDA press release.
Like it or not, agriculture is now a highly interconnected and global enterprise, with changes in one crop affecting many others. Last year, for instance, the increased production of biodiesel from rapeseed in the European Union pushed rapeseed oil prices up 17 percent and drove up global prices for other vegetable and seed oils, according to the USDA's "Oil Crops Yearbook." For ethanol production, the outlook is for higher feed grain prices, but it remains unknown how the emphasis on corn production will affect other feed grains, the domestic and global livestock industry, and consumer food prices. The shift in prices, demand, and production may also lead to changes in government policies. On March 30th, the USDA's Economic Research Service (ERS) published a 58-page report, "Feed Grains Backgrounder," that examines these interrelationships. Although it provides no definitive answers, the report notes general trends and issues related to increased ethanol production. See the "Oil Crops Yearbook" and the "Feed Grains Backgrounder" (PDF 1.9 MB).