LANSING, Mich. — Ethanol, animal feed and export pressure continue to fuel the demand for corn in Michigan. With the state’s crop harvest about 83 percent complete, many elevators throughout the state are tightening their basis on corn.

“The west side of the state has historically had a narrower basis than the rest of the state,” said Bob Boehm, manager of Michigan Farm Bureau’s Commodity and Marketing Department. “There is a lot of livestock on the west side of the state, which consume a lot of corn. When you throw in the ethanol plant in Woodbury, that creates more demand for corn. That narrows up the basis.

“We’ve seen ethanol plants that are much closer to the futures price than a typical elevator away from a plant, just to show that they are looking for corn,” Boehm said.

According to a recent market outlook report from Jim Hilker, Michigan State University Department of Agricultural Economics professor and extension marketing specialist, expected U.S. corn yield has dropped 1.1 bushels per acre to 154.7 bushels per acre, with an increase of 700,000 acres, projecting 2007 U.S. corn production at 13.318 million bushels. (This is based on USDA’s October Crop Production estimate; expected yield and production decreased slightly in the November report.)

Reports also show Michigan planted more corn as well, and is expected to harvest 2.36 million acres, 130,000 more than the previous estimate. Michigan’s projected corn yield was raised from 113 to 117 bushels per acre. That’s still 18 bushels per acre below the trend and 30 bushels below last year’s record.

As a result, the state’s projected corn production has been raised to 276.1 million bushels, up 24 million bushels from the September 2007 USDA estimate, according to Hilker.

Jason Haag, who farms about 400 acres in Tuscola County, said his corn yield was down this year due to drought conditions. “I averaged 140 to 150 bushels per acre, which is better than expected due to the severe drought we had,” Haag said. “I combined a couple hundred acres for my dad at well over 200 bushels per acre, but that was in the Saginaw Bay area. They had rain there.

“I thought I wouldn’t be able to fill my whole contract, but I was able to.”

Boehm said that while lower than hoped-for yields are a reality throughout the state, the increase in planted corn acreage is helping shore up the hole in the supply and demand equation. “Because of the dry weather and drought conditions, I would say our corn crop is significantly smaller than an average corn crop,” Boehm said. “We planted about 15 to 18 percent more acres in 2007 than in 2006, in response to higher corn prices. That’s why we’re not in dire straits” with lower than projected yields.

In addition to exporting a portion of the crop to other countries, much of the state’s corn is sent to the southeastern part of the United States for livestock feed, according to Boehm. The anticipated increase in production due to more acreage being planted in 2007 was expected to meet the state’s demand as well as fulfill the needs of the export market, while leaving enough corn to fuel growth in the state’s ethanol industry.

“With the lower yields, we ended up with a reasonable sized crop supply, but certainly not what we could have used,” Boehm said. “That’s why the basis is fairly narrow.”

With tighter corn supplies, cash prices in Michigan have improved about 60 cents during the last month due to the combination of a tighter basis and a stronger futures market. Current cash prices are holding around $3.60 per bushel.

Just two years ago, Michigan growers planted 225 million acres of corn, averaging 143 bushels per acre at $1.88 per bushel, according to data from the National Agricultural Statistics Service (NASS). Last year, ethanol began to fuel the corn market. Farmers planted about 220 million acres, with a yield of 147 bushels per acre, and averaged $3.20 per bushel.

This week, the USDA designated all 83 Michigan counties a primary natural disaster area due to the summer drought. That means Michigan farmers will be eligible for federal disaster assistance, which includes low-interest emergency loans from the Farm Service Agency. Applications will be considered based on the extent of losses and other considerations.