Print  email 

High ethanol demand fuels increase in corn plantings

By NAFEESA SYEED | the Associated Press • Published March 31, 2007

• Comments (0)

Corn is a key ingredient in many foods, from corn syrup found in candies and in cough syrup to feed used in meat production.

Chicken producers welcomed the planting report, hoping that an increased corn supply would reduce feed costs that have led to a 40 percent rise in chicken prices. But they noted that the bigger corn harvest would come at the expense of soybean acres, expected to drop by 11 percent.

"This is definitely a mixed report," Bill Roenigk, senior vice president and chief economist at the National Chicken Council, said in a statement.

Livestock and dairy producers also were optimistic that increased corn production could lead to a decline in feed prices. That presumption showed up in the stock prices for chicken producers on Friday. The shares of Pilgrim's Pride Corp., Tyson Foods Inc. and Sanderson Farms Inc. all rose after the news.

Corn for May delivery was trading at $3.74 a bushel Friday on the Chicago Board of Trade, down 5.1 percent, or 20 cents from Thursday, the daily limit for loss set by the board.

Corn prices had fallen about 17 percent from their Feb. 26 10-year high of $4.50.

Agriculture industry analyst David Driscoll, of Citigroup Research, said in a report to investors Friday that he expects the increased corn acres to cause the price of corn to fall to about $3 a bushel by December.

Corn had been stuck at around $2 a bushel for years before the ethanol boom lifted prices.

Bob Ray, a senior vice president at the Chicago Board of Trade, said predictions that corn prices will continue to decline because of plentiful supply from a huge harvest must be balanced with increasing demand from the export market.

Both China and India have sent signals recently that they'll import significant amounts of U.S. corn. The Chinese can't raise enough corn to feed their rapidly growing livestock market, and India has recently lowered tariffs, indicating plans to import grains from the United States.

A wild card also could be the European Union, which also has to meet required renewable fuel mandates and doesn't have enough land available to set aside for grains to make into ethanol.