Corn has become the new four letter word for row crop production in the Southeast, with up to 200,000 new acres expected in the Carolinas and Virginia for the 2007 crop year.
Some estimates predict corn acreage will revert back to the post-World War II era.
So far, growers have been more open about what they are not planting than what they will plant. Clearly, cotton will take the big hit in terms of acres lost. With everyone from President Bush on down extolling the virtues of ethanol production from corn, and with corn prices staying at near 10-year high levels, it is the logical choice to fill the reduced cotton acreage.
The recent State of the Union Address gave ethanol production a new shot in the arm. Seemingly politics, price and environmental support are all in the mix that is sure to keep corn prices high and to cut into acreage planted to other row crops.
In North Carolina, Billy Carter, executive-director of the North Carolina Cotton Growers Association, says he fully expects a 10-15 percent loss in cotton acreage. At the recent Southern Cotton Growers Association and Southeastern Cotton Ginners meeting, estimates were as high as 25 percent losses in cotton acreage in North Carolina.
Joel Faircloth, cotton and peanut specialist at Virginia Tech's Tidewater Research and Extension Center says his state is looking at a 25-30 percent reduction in cotton acreage in 2007. Though as in North Carolina, Faircloth points out that taking acreage out of cotton doesn't mean all that land will go into corn production.
“One of our larger cotton growers told me recently he will reduce his cotton acreage by 50 percent in 2007. As in the Carolinas, Virginia growers are slow to make decisions to grow corn, primarily because of the uncertainty of seed supplies.”
The 2007 increase in corn acreage should not be a surprise to Southeastern growers. Economists in the Midwest have predicted increases nationwide since the middle of the 2006 growing season. Chris Hurt, an ag economist at Purdue University is one who has predicted dramatic increases in corn production since the fall of 2006.
“There is no doubt we will need massive increases in corn production in 2007. That increase is driven primarily by the demand for corn in ethanol production, but we also have a strong export demand. In terms of acreage, we will need nearly 90 million acres of corn,” Hurt says.
If the Purdue economist is accurate, that would mean more than a 10 million acre increase in corn over the 2006 crop. This would be the highest level of corn production since 1946 in the U.S.
The U.S. uses about 140 billion gallons of fuel annually. Maximum corn production in the U.S. is expected to be in the range of 12 billion bushels in 2007. If all this corn was converted to ethanol, even at the highest possible rate of three gallons per bushel, this would leave the U.S. in need of over 100 billion gallons of fuel from other sources.
By the 2008 crop year, mega ethanol plants in North Carolina and Georgia will add another 80 million bushels of demand. If three additional plants, all at 108 million gallon capacity come on line as planned in 2009 in Virginia and North Carolina, this would add yet another 120 million bushels of demand for corn.
In the Southeast, the availability of good corn land is not high, unless it comes from other crops. Corn grown on marginal land, even under ideal growing conditions, and sold for high prices, could still be a losing proposition for Southeastern growers competing for markets with Midwest corn.
In 2006, U.S. corn growers averaged 151 bushels per acre. In tests in South Carolina, using irrigation and optimum production practices only four varieties tested topped 140 bushels per acre. Even under ideal weather conditions and on good corn soil, producing high yields of corn in the Southeast is difficult at best.
One long-range weather forecast calls for extended droughts in 2007 and 2008, based on El Nino occurrences. Dry May and June weather would severely limit corn production in the Southeast.
The threat of El Nino has not affected corn prices. As of late January, March futures were still at $4.05 a bushel. Most Southeastern grain farmers would privately agree they can make money on corn at $ per bushel. Cotton at 50-60 cents a pound and peanuts at $475-$495 per ton cannot compete with the profitability of $4 per bushel corn.
Corn producers got a major boost from President Bush's State of the Union speech. The underlying message to the American public was interpreted by some that corn and ethanol will solve the energy problem in the U.S. Most people involved in agriculture and energy know that is far from the case, unless ethanol is imported into the U.S. to compete with gasoline.
Illinois Senator Richard Durbin and his House counterpart Congressman Jerry Weller wrote scathing letters to the President strongly encouraging him to not reduce or eliminate tariffs on non-domestic ethanol. Bringing in ethanol from foreign countries would be a serious blow to agriculture, especially if it happens after farmers gear up to produce more corn.
While the guesses as to how many acres of other crops will go into corn production in the Southeast vary from economist to economist, and are based on models and long-range forecasts, farmers are more resolute. Most are driven by profit and the promise of staying in the business.
At the recent Southern Cotton Growers and Southeastern Ginners Annual Meeting, one group of farmers talked openly about plans to increase corn production. “When peanut prices dropped and costs kept going up, I parked my peanut equipment,” one said, vowing to park his expensive cotton equipment if corn or other crops offer a better profit potential.
Nationwide, soybean and corn acreage is about equal. In the Southeast corn acreage is larger, except in North Carolina. Soybean acreage is not likely to take a big hit from additional corn acreage. Soybean prices are still around $7 per bushel, new Zone 4 varieties are now available, and the threat of soybean rust has been better defined, if not reduced.
Tobacco acreage seems to have stabilized after the buyout program a few years ago. While there may be some additional erosion of acreage, tobacco won't be a major factor in providing new land for corn production.
Peanut acreage has dropped steadily in most states, other than South Carolina. Contracts in the $475 to $500 per ton may be enough incentive for most growers to continue to plant peanuts, but it's not likely to inspire many new growers to plant the crop. Peanut acreage will likely be tough to predict, because the kicker for most growers is whether funds will be available to pay for transportation and storage. If that issue isn't fully resolved by planting time, there could be a bigger drop in peanut acreage.