ATTICA, Ohio — Higher-than-usual corn prices have grain farmers smiling, livestock producers frowning and everyone wondering how long it will last.

“Times are good in the grain market,” said Matthew C. Roberts, an ag economist in Ohio State University’s Department of Agricultural, Environmental and Development Economics during the 2006-07 Policy and Outlook meeting sponsored by Sutton Bank. The meeting was at the Attica Fairgrounds last week.

Roberts said it’s easy to overthink about what to plant next spring during a time when corn is $3.50 a bushel, soybeans are $7 and wheat is $4.

“Be careful as we go forward,” he said.

Roberts said the ethanol craze is partially responsible for the higher-than-usual corn prices. But he said they are also being partially driven by a high level of exports. This year, 2.2 billion bushels were sent to other countries.

The export potential to the Far East is increasing.

“The Chinese animal market is exploding,” he said. “In the long run, it probably matters more to the corn market than ethanol.”

Although China has land that will grow corn, the people are stuck in 19th-century farming practices, which provide poor yields and no inexpensive way to transport corn from the northern part of the country where it grows to the southern part where it is needed. It’s less expensive to import it, he said.

Domestically, he said 3.5 billion bushels of corn were used for food, seed and industrial needs this year. While grain farmers like high corn prices, livestock producers don’t. He said livestock producers are buying large quantities now in case prices go up, which is also contributing to the decreasing supply.

Roberts said the U.S. supply of stored corn is the least in about 10 years. The 1995-96 shortage was due to a poor harvest, he said, but this year’s harvest was the third largest in history. The U.S. used 6.1 billion bushels for animal feed this year and is on track to use 12.2 billion bushels of corn next year, which means farmers must produce a record crop by planting between 5-6 million more acres than in 2006.

Most of that land is likely to come from fields that would have grown soybeans, he said, especially in the Western Corn Belt.

“The market is not pricing this as a temporary phenomenon,” he said.

But he cautioned producers to think of it as abnormal.

“It is easy to tell the story that we go back to $2.50 corn,” he said. If the United States plants between 7-9 million more acres instead, he said prices would go down because of a large supply.

“It’s not at all unrealistic,” he said. “Don’t get locked into the mentality that $3 corn is here to stay.”

Roberts said it probably will be a good year to look into buying crop insurance. While there isn’t much corn in storage, Roberts said soybeans are plentiful. The global market has more in storage this year than any time since the mid-1980s.

The United States used almost 2 billion bushels in 2005 and more than 1.1 billion bushels were exported. Therefore, he isn’t clear on why soybean prices have risen.

Poor harvests in Brazil during the past few years might be a reason and the threat of rust hitting the United States might be another reason.

He said farmers are planning to plant corn on land they would normally have planted to soybeans next spring, but the number of acres isn’t known.

In the wheat arena, Roberts said the futures market is in a shambles and exports are down.

“The futures market is irrelevant,” he said. “Sell wheat forward aggressively, no matter the price. Make sure your wheat has a home.”

This farm news was published in the Dec. 13, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.