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More continuous corn is coming

Agriculture.com Staff 04/05/2006 @ 8:29am

What a difference a year makes. Last spring, there was lots of talk about continuous corn despite the fact nitrogen prices had risen considerably.

Fast-forward to the spring of 2006, and analysts believe soybean acres will increase while corn acres decrease, partly because nitrogen prices rose even further and energy costs have skyrocketed.

There was a time or two last winter when I thought the magazine should put cover stories about continuous corn on hold. But it looks like this year will simply be a temporary reversal in the gradual trend to more continuous corn.

In March, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri issued a new 10-year economic baseline report. Among several projections is this one regarding corn: "Corn acreage falls slightly in 2006 because of higher production costs. But, rising prices and increasing yields will encourage producers to shift acreage from other crops, including soybeans, to corn in later years."

FAPRI expects season average corn prices to go from $1.90 in 2005-2006 to $2.10 in 2006-2007 and to $2.20 in 2007-2008.

You can thank ethanol for part of the projected rise in prices. According to Pat Westhoff, a FAPRI analyst, "This 2006 baseline foresees faster growth in ethanol production than in the 2005 baseline. Higher petroleum prices and provisions of the Energy Policy Act of 2005 add to the growth."

The new baseline, which Congress will use as they rewrite the farm bill, projects that by 2014 ethanol will consume 2.8 billion bushels of corn. That's a dramatic increase from last year, when they projected ethanol would use 2 billion bushels of corn by 2014. (And Westhoff says several economists at a baseline review thought FAPRI projections for ethanol were too low this year.)

Ethanol is expected to consume more corn than the export market by market year 2007-2008.

It's been nearly 20 years since I raised any second-year corn. That's probably because I spend more time on agronomic issues than I do on economic issues. Most agronomists would rather add a third crop to the corn/soybean rotation than switch to a monoculture.

However, there's no getting around the fact that continuous corn has often been more profitable than a corn/soybean rotation over the past few years.

But there is also no getting around the fact that production costs have risen more for corn than soybeans. As University of Illinois ag economist Gary Schnitkey points out in the cover story (see page 26), "On Illinois grain farms, variable costs for corn are projected to be $55 per acre higher in 2006 than in 2002. Variable costs for soybeans are projected to be $20 per acre higher in 2006 than in 2002."

Attitudes about risk have changed, also. Schnitkey says, "Up to 2003, soybeans were often viewed as the 'safe' crop since soybean yields didn't exhibit as much variability as corn yields. In 2003, that perception began to change as soybean yields were considerably below trend line yields on many farms."

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