<b>By LINDA McGURK<br>
Indiana Correspondent</b> </p><p>

LINDEN, Ind. — What’s a good price for soybeans? How high can corn prices go? And are we going to run out of wheat?</p><p>
The biofuel boom, in combination with a weak United States dollar and rapid world economic growth, are causing volatile commodity markets that sometimes leave even the best of agricultural analysts and market experts with more questions than answers.
“These are not any kind of normal times,” said Chris Hurt, Purdue University agricultural economist, during an outlook seminar in Linden on Jan. 15.</p><p>
Having said that, he attempted to put the recent high grain prices in perspective and provide some guidance to what the future might hold for the American farmer. Hurt identified the biofuel boom as the single biggest driver behind rising grain prices – and right now, the industry is in the middle of a big surge.</p><p>
“We’ve seen roughly 55 percent of the ethanol surge and 45 percent is still to come,” he said, referring to the growth in refinery capacity, both nationwide and in Indiana.</p><p>
“Between today and six to eight months from now, we’ll have the biggest surge of the ethanol industry that we’ve ever seen.”</p><p>
At the start of last year, the sole ethanol plant in Indiana had the capacity to use 36 million bushels of corn, but as several more plants came online during 2007, that figure increased to 163 million.</p><p>
With five more plants under construction, the ethanol industry in Indiana will likely use 310 million bushels of corn – or 31 percent of the state’s total yield – by the end of this year.</p><p>
Nationwide, corn usage by the ethanol industry is expected to increase from 2.6 billion to 4.8 billion bushels by the end of 2008.
“Three years ago, we raised 10 billion bushels of corn and said there’s no way the world could use all of that. Now we have one single sector that will use nearly half of that,” Hurt said. “For the 2008 crop, we won’t be able to raise enough corn to catch up with that capacity. Some ethanol plants may run on 85 to 90 percent of full capacity.</p><p>
“We’re going to see some very high prices for the 2008 crop and our anticipation for high prices is not going away for 2009.”</p><p>
Right now, the breakeven point for a new ethanol plant is about $5.30 per bushel of corn, and Hurt said there’s a “reasonable chance” prices will reach that level this winter. But given the rising soybean and wheat prices, “corn will not get a free lunch competing for acres” in 2008 and he expects corn acres to fall slightly this growing season.</p><p>
The renewable fuels standard passed by Congress last December mandates the production of 15 billion gallons of corn-based ethanol and 21 billion gallons of cellulosic ethanol by the year 2022, basically guaranteeing a market for ethanol, regardless of price.</p><p>
Based on that, Hurt suggested, “The big surge using corn for ethanol will be for the 2007 and 2008 crops, and then it will grow more slowly. Roughly after 2010 we’ll shift over to cellulosic ethanol. We don’t really know how that technology will evolve, but there are some pilot plants opening in 2009 and 2010.”</p><p>
With no signs of the U.S. dollar strengthening and consumers in China and India showing an insatiable appetite for U.S. grains amid possible record-tight soybean supplies this summer, a tight 2008 corn crop and wheat stocks already at their lowest level since 1948, Hurt also brought up the possibility of food shortages.</p><p>
“It’s a scary scenario … but we could see the world buy us out. The last time that happened was in 1972 when the Russians cleaned our pantry out,” he said, referring to the infamous Russian Wheat Deal. “We’re not there yet, but we’ve taken one step closer to a food emergency.</p><p>
“I’ll be very anxious to follow the world export data. Will the world start panic buying? If it does, we certainly haven’t seen the highs yet.”</p><p>
In a time when soybean prices may vary as much as $2 in a single week, it’s easy to get carried away with the idea of scoring big in the commodities markets, but Hurt cautioned against letting emotions drive decisions on the farm. Instead, he advised farmers to remain conservative and protect their margins against downside risks through crop insurance and pricing options.</p><p>
“It is so difficult to make pricing decisions right now,” he said. “What you can do is break it down in smaller units. If you normally sell 20,000 bushels at a time, break it down to 5,000 bushels and make regular sales.”</p><p>
Bob DeVault, a grain producer from Tippecanoe County, Ind., said he follows some of Hurt’s advice by buying crop insurance to protect his farm against low yields. His other major concerns this growing season are volatile prices and higher input costs.</p><p>
“Everybody’s vision is on the high commodity prices, but we’ve had a 40 percent increase in input costs,” he said. “What happens if beans fall to $8? The elevated risk (in price) is my biggest concern.”</p><p>
DeVault said he’s attended several of Hurt’s previous seminars to get a better grasp on the issues facing farmers.</p><p>
“Everybody’s got a different take on where the market is going. Nobody knows, but if you surround yourself with knowledgeable people, you have a better chance (of succeeding),” he said.