Corn Farmers Face Risks in 2007

Corn prices are climbing, but producers devoting more acres to corn have to bet that the ethanol boom lasts.

With corn prices at the highest levels in ten years, many producers are expected to plant more corn in 2007 - some are predicting the most corn acres in 60 years. However, farmers choosing to devote more acres to corn are betting that the ethanol boom will keep corn prices up, Purdue University agricultural economist Chris Hurt says.

"It's a wonderful time for corn producers. They're extremely excited but they're also apprehensive because they've seen booms before and they don't last," he says. "That tends to be the nature of agriculture."

Corn prices have climbed around $1 per bushel since mid-September, to $3.45 on Tuesday. At that time last year, corn was $1.50 to $1.80 a bushel.

Hurt says farmers incomes could get a 30% to 50% boost from higher corn prices this year. If the ethanol boom continues - more than 150 plants are under construction, planned, or in operation in the U.S. - the industry's demand for corn could continue to drive up corn farmers' profits.

Gary Schnitkey, a University of Illinois farm financial management specialist, says the issue of whether or not to shift acres to corn is a complicated one.

"We're treading in new territory now," he says. "We've never been in a position where we've seen this much new demand for a commodity."

 

Source: Dow Jones

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