State producing banner corn crop

Sep 04, 2006 (Messenger-Inquirer - McClatchy-Tribune Business News via COMTEX) -- Kentucky corn growers will have another banner crop to crow about this year. The U.S. Department of Agriculture is also expecting a record national crop.

"It's clearly a historic crop by any means," said Steve Riggins, a grain marketing expert with the University of Kentucky.

It even seems possible farmers will harvest the third-largest corn crop in the nation's history.

However large the corn yield, it won't be enough to keep up with demand.

With China and India clamoring for U.S. corn -- and with seemingly everyone constructing or at least thinking about building an ethanol plant -- corn is likely to remain a hot commodity for at least the next couple of years.

"It could be several years of good profits," Riggins said of what he calls the "ethanol bubble." "I think there's little danger of it collapsing in the next 24 months."

Corn growers in Kentucky and Indiana had excellent growing seasons. Even the Midwestern corn belt, which suffered some drought, is expected to produce at least an average corn crop.

"The yields don't look like they're going to be much reduced," in the Midwest, said Chris Hurt, a grain marketing specialist with Purdue University.

"From the farmers' standpoint ... they feel successful if they have a large crop, and that's looking really good," Hurt said.

The country also has an ample stock of corn in reserve. While the combination of a bumper crop and a large pool of corn would seem to be bad news for farmers, demand will continue to outstrip supply.

"When you combine the fact that you have this huge change in global demand that appears to be a permanent shift (with demand for ethanol), the talk is extremely bullish," Riggins said. " ...Almost everyone accepts it's the third-largest crop in history and it's not enough to (match) consumption."

"We're actually going to end up with much lower inventories of corn," Hurt said. "Ethanol is expected to grow dramatically. .... That's going to require a lot of corn."

Selling corn at harvest will not be the best option. Prices are historically low at harvest but rise as the winter progresses. A farmer who can store corn away will benefit from the decision.

By spring or early summer of 2007, corn prices could be about $2.75 a bushel, Hurt said

"Storage should be quite beneficial for corn," Hurt said.

Although this year's crop isn't even out of the field, farmers need to start planning for next year's crop, Riggins said.

For example, a farmer might be tempted to plant some winter wheat acres to take advantage of good wheat prices. But planting wheat will make those acres unusable for corn planting next spring.

"If you seed that wheat, you might be giving up the ability to raise $3.50 or $4 corn next year," Riggins said.

Another question farmers have to answer is whether to sign contracts that guarantee a specific price, or to hold out in the hope corn prices will continue to drift upward.

While Riggings doesn't expect the ethanol bubble to pop in the next 24 months, he said nothing is permanent.

"I would certainly say it won't last forever," he said.