One could argue that there was a shortage of corn before this year's harvest even began. As of Oct. 1, 2005 ethanol plants dotted the U.S. landscape, with a combined ethanol production capacity of 5 billion gallons.
The Renewable Fuels Association tells us there are 42 more plants under construction and 7 plant expansions underway. Those efforts will add 3 billion gallons to the U.S. ethanol production capacity. Looking further down the road, there are more than 300 business proposals for additional ethanol plants. If those are built, it would add more than 20 billion gallons of ethanol.
Keith Collins, USDA chief economist, says in 2010 90 million acres of corn will be needed to fulfill ethanol, livestock and export demands. He says corn prices would need to be in the $3.10 to $3.20 range to attract that many acres to corn. Corn futures for 2007 are pushing close to those levels, indicating that the price signals have begun to entice a substantial increase in corn acreage. "But where will that acreage come from?" asks Chad Hart, Iowa State researcher.
"The last time this country planted more than 90 million acres of corn was in 1944. In 1932, over 113 million corn acres were planted," he notes. "In that year, Texas was the sixth largest and Georgia was the tenth largest corn producing state, with nearly 10 million corn acres between them. So a historical analysis would indicate the possible return of corn acreage in the Southeast and Great Plains."
But the prospects for more corn acres in the Southeast and western Great Plains is much lower today. Large amounts of land planted to corn during those earlier decades is no longer in agricultural production. In 2006, Georgia corn producers planted 280,000 acres and Texas had 1.75 million acres. Total cropland in Georgia is now less than 5 million acres.
Due to population and land use, the upper Midwest and the eastern Great Plains are the mostly likely candidates for expansion, says Hart.
One potential pool of acreage is in the Conservation Reserve Program. However, it appears that only 7.7 million acres are scheduled for release, much of which is more better suited for wheat than corn. "So while some CRP land can be brought into corn production in the short term, CRP acreage will only be part of the shift," he notes.
The most likely source of new corn acreage will come from shifts in crop rotation from soybeans to corn. That raises the question of whether the two-year rotation between corn and soybeans will disappear -- which also will reduce annual yields. Hart believes a three-year rotation -- two years of corn followed by one year of soybeans-- could surface.
"Given the crude oil price outlook for the next several years, ethanol’s expansion is apt to continue for some time," says Hart.
As Collins points out, ethanol plants can compete for corn even at record high corn prices. Other corn users, such as livestock producers, other processors and the export market will feel the pinch. Certainly more corn acreage will be found, where that will occur, whether it will be enough, and what else will be displaced, is a long and evolving scenario.
Source: Chad Hart, Center for Agricultural and Rural Development, Iowa State University