Cotton has gotten most of the ink for the 2011 planting season in the Southeast, but the old standby, corn, is likely to remain strong in the region.
Strong demand for corn for ethanol production and continued good demand for livestock feed are driving forces.
Corn has been planted throughout the Southeast this spring and early reports indicate stands are good from the Florida Panhandle to northern Virginia.
Veteran North Carolina State Corn Specialist Ronnie Heiniger says corn’s time is here in 2011, but cautions growers to take heed of past opportunities to grow profitable corn that have turned out to be not so profitable.
“The first outlook for corn this year is all roses, or ears, he jokes. Corn is a miracle that is now ready to happen. Our time is due and the price is right — I believe that firmly,” he says.
“Hopefully, we learned some valuable lessons from the 2010 crop, which was stressful due to near record heat and drought across much of North Carolina. In 2011, corn growers are going to want to grow as much as they can, but they need to remember some lessons from both recent and past history,” he adds.
Among the Southeast states, only North Carolina is expecting a decrease in corn acreage in 2011 — and that’s only a 2 percent reduction.
Georgia and Florida are expecting the biggest acreage increases of 12 and 8 percent, respectively. Alabama, South Carolina and Virginia are all looking at 3-5 percent increases for 2011.
Corn has long-been the go-to crop for rotation in the Southeast. With such high volatility in the market place, many growers are looking more toward maintaining long-term crop viability than toward taking advantage of high market prices. The other part of the win/win situation with corn in 2011 is that corn prices are good, too.
Driven by oil
Much of the optimism in corn prices continues to be driven by oil. High oil prices and gasoline prices projected to reach $5 per gallon this summer have historically driven the demand for lower-cost energy, which pushes demand for corn-based ethanol.
More than a third of the U.S. corn crop, projected at 92.3 million acres for 2011, is expected to go to ethanol production. Likewise, demand for corn and for distillers grain, a by-product of ethanol production, remains high.
The driving question for farmers is: “How long will corn prices stay high.” Or, will corn prices stay high enough to offset the skyrocketing cost of production?
Demand for corn globally, for ethanol, livestock feed and human consumption; combined with poor harvest in many areas of the world have pushed corn stocks to near record lows.
Corn stocks in all positions at the end of 2010 stood at 6.52 billion bushels, below what traders expected.
To keep carry out stocks at current levels, corn producers will need to average 160 bushels per year, if they plant 92.2 million acres.
The slight drop likely reflects stronger than anticipated demand from livestock. Ethanol production through the first three months of the year has remained relatively steady at 900,000 barrels per day, or 13.78 billion gallons annualized.
Though the Southeast has toyed with the concept of ethanol production plants, the Midwest has seen these facilities blossom in the mid-2000s, fizzle in 2007-2008, and resurface again the past couple of years.
Troy Dummler, an area economist in southwest Kansas, says there is no doubt the combination of ethanol and high gasoline prices has been instrumental in pushing corn prices up and keeping them up going into the 2011 season.
“Corn acres were up last year, and I expect more acreage this year. How much of an impact ethanol demands have on increasing corn acreage is open for debate, but when you are using 35-40 percent of the total crop for ethanol, clearly there is a influence on price,” he says.
“If ethanol wasn’t a factor, and we produced the same amount of corn we produced the past 3-4 years, prices would be at historic levels, or around $2-$2.50 a bushel,” Dummler adds.
The rate of increase in ethanol production has slowed significantly in response to high corn and grain prices over the past 2-3 years. “I don’t really see much expansion, if any, in ethanol production, because of grain prices.
Determine ethanol profitability
“The other determining factor is oil prices. These prices will determine overall ethanol profitability. The price of the end product will dictate how much ethanol producers can spend on corn for stock, water and all other costs,” Dummler says.
Going into the 2011 growing season, the ethanol industry, especially in the U.S. appears to be on a winning streak.
In the first quarter of 2011, the EPA just announced a decision that allows for the expanded use of E15 gasoline (gasoline blended with up to 15 percent ethanol). With this ruling, the EPA has effectively expanded the size of the market for ethanol blended gasoline by allowing the use of E15 in cars manufactured after 2001.
The Energy Information Agency (EIA) released their latest estimates of ethanol production noting ethanol production was up to 922,000 barrels per day for the week ending Jan. 21, 2011. This is a new all time high and a sharp increase over the averages from 2010. According to many industry experts, ethanol production at 2011 levels puts U.S. production very near maximum capacity. Most ethanol plants are running full out and much of the commercially viable idle capacity that dates back to 2008 is back on line.
The only potential bump in the road for ethanol production in the U.S. is that ethanol inventories were up at the first of the year by 13 percent. Subsequent increases in gasoline prices have quickly reduced inventories back to near 2010 levels.
A quick drive across the Carolina back-roads is a clear indicator that corn isn’t going away from the Southeast landscape. It may not be the juggernaut crop cotton is expected to be in 2011, but stable prices and soil-building qualities are keeping corn high on the profitability list for Southeastern farmers.