By Tanya Brown
JOURNAL AND COURIER
Steve Kerkhove knows that the demand for ethanol is pushing the price of corn - one of the fuel's main ingredients - way up.
Unfortunately, he's one of several farmers who won't be benefiting from the price changes immediately.
Kerkhove is a Tippecanoe County farmer who thinks conservatively, so last year he locked in corn prices with his buyers for this season at between $2.40 and $2.60 per bushel. Add the customary 20 to 40 cent government subsidy to that and he'd have been looking at a decent harvest.
Except that as ethanol's corn needs have pushed the commodity to more than $3 a bushel, the government has cut out the subsidy in response.
Even so, he's looking forward to cashing in on record profits next year, when one Purdue University agricultural economist predicts that corn could eclipse record highs of $3.24 per bushel.
"These markets are funny things. That's about a dollar a bushel I've lost this year, and I do about 90,000 bushels," said Kerkhove.
"But next year could be pretty incredible. It'll be interesting to see what happens."
Chris Hurt, an ag economist at Purdue, said the ethanol equation, combined with higher export needs from growing countries overseas, could push both the production and price of corn to record highs in 2007.
Ethanol "is at about a 70 percent growth rate per year. That would double the industry about every 17 months," said Hurt. "That enormous growth rate is going to require a lot more corn, and this is what we have the opportunity in 2007 to supply."
Hurt said the United States might easily need to produce as much as 89 million acres of corn next year, an increase of 10 million acres over 2006. It would be the highest production in acreage of corn since 1946 in this country.
"The expected returns to corn would be about $90 an acre more than on soybeans, which would be a very large financial incentive to plant more corn rather than soybeans," said Hurt.
Farmers in Indiana typically work their fields in year-to-year rotations, growing first corn and then soybeans in an area.
Giving fields a rest from corn is beneficial for two reasons. Growing corn in consecutive years tends to lead to an almost 10 percent drop in yields, while growing soybeans in between leaves nitrogen in the soil which promotes a healthier corn crop.
Still, higher prices may entice some farmers away from soybeans, helping meet the nation's demand for corn. Hurt said this initially won't be a problem since high soybean yields in the past few years have left an excess of the crop available.
Dale Workman, a Tippecanoe County farmer who plants some of his river-bottom ground primarily in soybeans because of the plants tendency to recover from floods, said he may reconsider how he structures his acreage next year.
"I may take some of that high-risk ground and grow corn on it if corn gets really profitable again," he said. "You never know."