Agribusiness  March 2, 2007

Market for ethanol corn creates good crop outlook

Crop experts say a blossoming ethanol infrastructure in Northern Colorado could sway local growers into planting more acres in corn this year.

Last year, Colorado growers planted 1 million acres of corn and harvested 860,000 acres, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service. At harvest time, they received an average price of $3-plus per bushel – up substantially from the average price of $2.25 per bushel the previous year.

The big jump in price was largely attributed to a rapidly maturing ethanol industry and government policies aimed at increasing the amount of alternative fuels in the nation’s fuel supply over the next five years.

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And the even-better news for corn farmers or those considering switching to corn is that corn futures prices in late February were hovering above $4 a bushel, a price likely to substantially increase corn acreage in the upcoming growing season.

“Seed corn people, generally speaking, are saying seed sales commitments are up for corn, which I guess is no great surprise,´ said Mark Sponsler, executive director of Colorado Corn Growes Association in Greeley. “I think it’s safe to say the number of acres planted in corn will be up over last year.”

Switching to ethanol market?

Sponsler said most local corn producers – between 80 percent and 85 percent – grow corn for livestock feed. But a burgeoning demand for ethanol may steer some of them toward the ethanol market and away from livestock, he said.

Sponsler noted that nationwide there is about a 1 billion bushel carryover of corn from last year. But even with that surplus the outlook for corn demand remains very positive. “I think it’s interesting that there’s that big of a carryover and the price is still strong,” he said.

Northern Colorado is now home to ethanol processing facilities in Windsor, Sterling and Yuma and others are planned near Evans and Walsh in southeastern Colorado. Last month, Gov. Bill Ritter announced that 22 more gas stations in Colorado would add E85 ethanol/gasoline flex fuel to their pumps.

Sponsler said all of that is encouraging farmers to consider corn when planting season begins in April. “It’s a notch in favor of planting corn over another crop,” he said.

The 2007 outlook is also good for the region’s biggest crop, wheat. Colorado farmers planted 2.2 million acres of wheat last year, more than twice than was planted in corn. Darrell Hanavan, executive director of the Colorado Association of Wheat Growers in Denver, said the projected price for wheat this year is about $4.50, a big jump from the $3.35-per-bushel average price in 2005.

“The price was good,” he said. “But we had the record smallest (winter) wheat crop since 1969. I think it bodes well for the next marketing year we’re in now. We have the potential for an above-average crop and prices.”

Wheat is unusual in that growers can grow it almost year-round, with winter wheat planted in the late summer or early fall for harvesting the next summer and spring wheat planted in April or May for harvest in the fall.

New crop interaction

Hanavan said he expects to see more Colorado fields planted in corn this year to satisfy “a huge and growing ethanol demand.” That shift to corn will also be good for the prices of wheat and other commodities, he said, as they become less available.

“We’re going to see prices for all commodities move up as a result of the demand for corn driven by ethanol demand,” he said. “I really believe it’s going to push wheat demand and price.”

Hanavan said the rapidly growing demand for corn is creating “an interaction (between commodities) that we haven’t seen in the history of agriculture.”

Another major Northern Colorado crop – sugar beets – also looks to have a good year in 2007, according to Mike Hofer, vice president of agriculture for Western Sugar Cooperative based in Denver. Hofer said last year “was very difficult for our growers, especially on the Front Range” where a shortage of rain reduced yields.

The Western Sugar Cooperative is composed of about 1,000 shareholder/growers in Colorado, Wyoming, Nebraska and Montana who contract to grow sugar beets for the cooperative’s five processing facilities.

The cooperative has steadily been increasing the number of acres planted since 2003 and last year planted about 42,000 acres that produced 947,000 tons of beets. That’s a far cry from the late 1990s, when more than 72,000 acres of beets were planted.

A longtime fixture in Northern Colorado agriculture, sugar beets have come under intense competition from sugar from cane grown in tropical climates.

Still, Hofer said 2007 looks promising for the cooperative. “I think it’ll be good,” he said. “We’re contracting our acres right now. Beets have been an important part of these guys’ farming for over 100 years.”

But Hofer said the cooperative keeps a measure of control over how much is planted – likely around 40,000 acres again – to help keep prices up and not overload its processing capacity.

“We have five facilities and want to keep them fully utilized,” he said. “(Forty thousand acres) is about what we need each year.”

Hofer also senses a move to corn by some growers to reap the ethanol boom. “Do I see more acres switching to corn? Definitely.”

Crop experts say a blossoming ethanol infrastructure in Northern Colorado could sway local growers into planting more acres in corn this year.

Last year, Colorado growers planted 1 million acres of corn and harvested 860,000 acres, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service. At harvest time, they received an average price of $3-plus per bushel – up substantially from the average price of $2.25 per bushel the previous year.

The big jump in price was largely attributed to a rapidly maturing ethanol industry and government policies aimed at increasing the amount of alternative fuels in the nation’s…

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