High Prices Keep Corn Growing.

The last three years have seen some large increases in the amount of corn planted in Iowa's fields. Due in large part to the market demand for corn the price in the last year has risen above $6.00 a bushel. According to the USDA approximately two million more acres of corn will be planted this goes hand in hand with the predictions that foretold the high corn prices. In the spring of 2011 the USDA released predictions that speculated high corn prices would continue through the winter of 2011. The possibility of a high return, with an estimated 150 bushels an acre, has shifted growers to corn and away from other crops, such as soybeans, creating a more competitive market. The USDA predicts that the two million more acres of corn will be planted in the US this year, which may sharply decrease prices during the fall harvest. One factor that to drives the corn prices is the competition between cattle and ethanol. Cattle are traditionally finished in a feedlot setting with rapid weight gain made possible by feeding them corn. Now producers are keeping cattle out in pasture longer to help decrease the cost of feed and in turn their weight before auction is lower. In contrast, ethanol uses consist amounts with no seasonal fluctuation so the industry tends to set consistent prices. According to the Iowa Corn Growers Association, the ethanol industry does not directly compete with food producers for the corn coming out of every field because ethanol has created its own supply chains. The ethanol producers often set contract prices with farmers so that they can have consistent prices throughout the year. The more growers that sign on for the forward-pricing that ethanol producers offer and away from the volatile consumer market will undoubtedly place more pressure on the price of corn bound for American dinner tables. USDA research done through Cornell University found approximately 37% of corn produced in America is used for ethanol production. This percentage is expected to increase as more E-85 vehicles are purchased and the use of alternative fuels becomes more mainstream. Corn prices long reaching effect in our economy doesn't just stop at the gas pump. For instance, the Consumer Price Index published numbers that showed an increase of 0.8 percent in the cost of all food goods in 2010. Their prediction for 2012 is between 3-4 percent increase, which is a massive increase directly related to the increase in corn prices. The high prices of corn are also being influenced by world market demand. Bad growing conditions have been a factor in other countries encouraging farmers out of traditional crops and into the more hardy corn varieties. Following such a trend, the Chinese have emphasized reducing the planting of soybeans to pursue the more profitable corn. This trend will continue in other countries as well because corn is becoming a staple of world diets. Predictions aside, farmers are excited about the prospect of $6.00 bushels of corn. The fall harvest of 2011 will be a deciding factor in every food market around the world and with any luck the corn producers of Iowa will come out on top.