US farmers plan to cash in on the ethanol fuel boom by planting the largest area to corn in 63 years, potentially yielding a record crop and calming fears that renewable fuels will steal grain needed for food and feed, the federal government said on Friday. Even with record output, this year's corn crop could sell for a record US$3.50-$3.60 a bushel at the farm gate, market watchers said. Corn prices have doubled since last fall due to explosive growth of the ethanol industry, driving up costs for cattle, dairy, hog and poultry producers.

Based on a survey of 86,000 farmers earlier this month, the Agriculture Department projected corn (maize) plantings of 90.454 million acres (36.6 million hectares), which would be the largest acreage since 1944. With normal weather and yields, the harvest would be 12.5 billion bushels (317 million tonnes) -- 700 million bushels more than the record set in 2004. "With a medium yield, we could get just about enough corn in the year ahead," said private consultant John Schnittker.

USDA forecasts corn usage of 12.3 billion bushels in 2007/08, including 3.2 billion bushels for making ethanol, up 1 billion bushels from the 2006 crop. With corn plantings on the rise, Agriculture Secretary Mike Johanns said USDA will not offer a penalty-free "early out" for land in the Conservation Reserve, which pays landowners to idle fragile land. Livestock and agribusiness groups have campaigned for putting the reserve back into crops. Ten percent of US cropland is in the reserve.

Farmers could collect nearly US$46 billion from sales of a mammoth corn crop, said Ann Duignan, an analyst at Bear Stearns, "which in our view is positive" for sales of farm equipment. Other analysts said huge plantings would benefit seed and herbicide companies and food processors too.

The Renewable Fuels Association, a biofuels trade group, said with high yields the US corn crop could hit 13 billion bushels. "Such a harvest would meet the needs of all the sectors that rely on it," said RFA. "We needed a (planting) number like this to assure our customers will have enough," said National Corn Growers Association president Ken McCauley, who watched USDA release the report. He said the crop could tally 12.6 billion bushels.

Corn is the dominant feedstock for the 114 ethanol distilleries in operation across America. Output may reach 6.5 billion gallons this year since 3 billion gallons of capacity will come on line, the group said. In 2006, 4.89 billion gallons were produced.

Citigroup analyst David Driscoll said a bumper crop would lower corn prices to around US$3 a bushel at year's end. Planting plans are months away from harvests, however. "The weather is going to drive it all," said Tom Buis, president of the National Farmers Union, pointing to the uncertainties of the growing season. The stampede to corn may become a damaging ethanol "blow-out" that slathers pesticides and synthetic fertilizers on cropland, which will leach into waterways, said Ken Cook of the Environmental Working Group.

SOY, COTTON, RICE SHRINKS
Growers told USDA they will cut back on soybeans in the Midwest and on cotton and rice in the South to sow more corn. Soybeans are forecast at 67.140 million acres (27.2 million hectares), the smallest area since 1996, while upland cotton would be the smallest since 1989 at 11.855 million acres (4.8 million hectares). Rice, at 2.64 million acres (1.1 million hectares), would have the smallest seeded area since 1987.

Farmers say they will plant 60.3 million acres (24.4 million hectares) of wheat, up 5 percent from 2006. USDA forecasts a modest rise in food prices this year, but said, "With high corn prices increasing feed costs, beef and poultry price increases should begin to accelerate in 2007."

Iowa, traditionally the No. 1 corn state, would plant 13.9 million acres this year, up 1.3 million acres from 2006, USDA said. Illinois would plant a record 12.9 million acres of corn, up 1.6 million acres, while cutting soybean plantings by 1.4 million acres, the largest decline in the country.

Corn futures prices plunged by the daily 20-cent limit at the Chicago Board of Trade due to prospects for huge corn seedings. Corn for September delivery closed at US$3.81-1/4 a bushel. September soybeans ended at US$7.90-1/2, down 14-3/4 cents. At the end of the day, July wheat was down 21-1/4 at US$4.53-3/4.
(By Charles Abbott, Planet Ark, 02/04/2007)