By TIM THORNBERRY
Kentucky Correspondent

COLUMBIA, Mo. — It’s not news that much of the nation’s corn crop goes toward fuel production, but until this year, the majority of field corn was still used for animal feed. That is all about to change, however, according to Ron Plain, an economist for the University of Missouri extension.

Plain, citing the USDA’s latest Crop Production and Supply/Demand report, said this will mark the first time ever that more corn will go for ethanol production than animal feed – 200 million bushels more. This could pose a challenge for the livestock and poultry industry, he added.

“You have to go back to 1995 to find a smaller amount of corn to be fed to livestock in the U.S. That is going to make things tough for the livestock and poultry industries,” he said.

“Grain prices are higher because we are using 40 percent of our corn crop to make fuel and that tightens up the feed supplies, raises production cost for livestock and poultry, creating a lot of red ink for producers. They downsize the herd to get in line with the feed supply and that has meant less meat in grocery stores and higher prices for meat.”

One thing that could help is better weather.

Spring flooding coupled with a massive heat wave has prompted the USDA to lower expected yields for most crops.

“Weather has been a challenge this year. The Eastern Corn Belt was very wet early on and a lot of corn was planted late,” Plain said. “We had flooding problems along the Missouri, Ohio and Mississippi rivers, which reduced some acreage.

“Then, we’ve had a hot summer most everywhere in the Midwest and that is stressful on corn, so we are expecting corn yields to be down this year relative to expectations, and the less corn we produce the higher the price goes.”
Obviously the better the weather, the better the potential for higher yields. Something else that might help create higher production would be better varieties of seed, added Plain.

Earlier this year the USDA opened the door for use of a corn variety developed by Syngenta Seeds, Inc. that is for fuel purposes only.
The agency announced the deregulation of corn seed with the amylase trait Enogen. Syngenta planned to start small this year, with expanded production for 2012.

Another factor to consider is the tax subsidy currently enjoyed by ethanol blenders.

The U.S. Senate voted to end that credit last month even though it was set to expire at the end of this year. But the House failed to act in light of the debt ceiling issue.

If indeed those tax credits do expire, a reduction in the amount of corn going for ethanol production could be realized, according to Plain, freeing up more of the crop for feed purposes.

Regardless of its use, the demand for corn has increased, something that is likely to continue especially as exports of agriculture commodities continue to rise.

Corn growers and supporters have long said they can meet those demands. If the price of corn stays high – and it likely will if present conditions persist, including tight carryover supplies and reduced yield estimates – growers are just as likely to continue to increase production.

Plain said this mindset of always being able to meet the demand may be unrealistic when taking into consideration all the variables that occur in any given growing season, such as weather conditions.

He also said as prices rise, demand generally falls.

“Corn farmers in the United States used to grow all the corn we need at $2 per bushel. Now they are growing all the corn we need at $7 per bushel. We would use a lot more corn and have a lot more livestock and poultry in this country if corn prices were closer to $2 than at $7, and the question is, what’s the situation going to be next year?” he asked.

“If we have a poor crop next year, we could well have $10 corn and the answer is, corn farmers would grow all the corn we need at $10 per bushel. But for the people who are buying that crop, they are going to buy and use a whole lot less.”

Plain added in the event of another year of bad weather in 2012, that $10 mark is realistic, something that would further hurt livestock producers.
The bottom line, he noted, is with the demands put on corn production caused by its use for ethanol, a record corn crop is needed every year.

“We need a record every year; otherwise, it looks like corn prices will keep rising. Corn farmers are working hard, planting a lot of acres and spending a lot of money on the crop and doing everything they can,” he said. “But you just can’t get the weather to cooperate every year, so you’re not going to get a record every year.”