LITTLE ROCK — The United States’ corn crop - valued at $66.7 billion in 2010 - is in higher demand both in this country and around the world this year, driving up its market price and costs for companies that use it to feed poultry, cattle and hogs.
The price of corn hit an all-time high earlier in April at $7.8375 a bushel, well over the previous high of $7.65 in June 2008. Prices at closing Thursday were down nearly 30 cents from the early April high after predictions of drier weather in the Corn Belt states that would allow farmers to start planting fields that had been water-soaked.
“Feed represents about twothirds of the cost of raising a chicken. We’re doing what we can to mitigate this cost, but grain prices - especially corn - remain high and ultimately consumers will pay more for food,” said Gary Mickelson,spokesman for Springdalebased Tyson Foods Inc., in an e-mailed statement.
He said the company is looking into alternatives to corn in poultry feed. Tyson is considering supplementing the feed with some wheat overthe summer when wheat supplies are plentiful and the price more competitive with corn, Mickelson wrote.
The poultry industry suffered from high fuel and feed costs and low prices broughton by an oversupply of chicken in 2008. Poultry giant Pilgrim’s Pride Corp. filed for Chapter 11 bankruptcy reorganization in December 2008, citing those reasons for its shortfall in paying its debts. The company was bought by Brazilian meat processor JBS SA in December 2009.
A return to 2008-level prices for corn at a time when the corn supply is on track to hit a decades low is troubling to meat processors and analysts alike, according to U.S. Department of Agriculture reports.
The department estimates that only 18 days’ supply of corn, or 745 million bushels, will remain at the end of the 2011 crop year Aug. 31. That’s the lowest level since 667 million bushels were left at the end of the 1970 crop year, according to the National Corn Growers Association’s annual report “World of Corn 2011.”
Purdue University agriculture economist Chris Hurtadvised farmers to plant more corn after the USDA’s report on prospective plantings and grain stocks was released earlier this month.
The USDA’s estimate for 2011 is for 92.2 million acres to be planted in field corn. At a 91.7 percent harvest rate of a projected yield of 162 bushels per acre, farmers will grow 13.7 billion bushels on 84.5 million harvested acres, the USDA said April 5. The estimates will be adjusted regularly throughout the growing season.
When sold at a price of $7.55 a bushel, the farmer gets about $5.40, said Paul Bertels, vice president of productionutilization for the corn growers association.
Hurt estimated the return on an acre of corn to be about $561 before expenses are deducted.
In 2010, 88.2 million acres were planted and 81.4 million acres were harvested of an average of 152.8 bushels per acre for a total of 12.4 billion bushels, according to the corn growers association.
Hurt said ethanol is a source for new demands on the U.S. corn crop. The Environmental Protection Agency increased the amount of ethanol blended into gasoline supplies from 10 percent to 15 percent. That will drive the amount of corn needed to create that ethanol to a record 5 billion bushels in the year that will end Sept. 1, according to the USDA.
That 5 billion bushels is 36.5 percent of the entire U.S. corn crop, second in demand only to the needs of feed and residual use at 5.2 billion bushels, according to the corn growers association.
The increase in ethanol levels is stressing the demand on an already over-stressed commodity, poultry growers testified before the House Agriculture subcommittee on livestock, dairy and poultry earlier this month.
The National Chicken Council and the National Turkey Federation are asking for the ethanol standard be lowered when corn supplies drop to low levels such as the U.S. is now experiencing, a former chairman of the council, Michael Welch, testified.
Welch said the federally mandated ethanol use, along with subsidies that support its cost and protections from import competition, is a “tripleoverkill” driving up the price of corn on futures markets.
Proponents of ethanol use say it can improve national security, create a fuel source from a renewable resource and support farmers. The demand that ethanol production places on corn as a food stock can be offset with investment in exploring and refining cellulosic ethanol made from other plants such as timber waste or switchgrass, Secretary of Agriculture Tom Vilsack said earlier this month.
The Renewable Fuels Association stated in an April 14 news release that the Congressional Budget Office found that factors other than biofuels were responsible for as much as 90 percent of increases in corn and food prices in 2008, the greater part of those factors being speculation and energy prices.
The National Corn Growers Association says there are more than 4,200 uses for corn, although it counts cornbread, corn muffins and hushpuppies separately in a partial listing in its “World of Corn 2011” publication.
There is a wide range of food, industrial and pharmaceutical products that depend on various components of a corn plant - including the stalk, cob and parts of the grain itself. Fireworks, soaps, disinfectants, fiberglass sizing, drilling fluids and rubber substitutes all use some part of dry- or wet-milled corn kernels and cobs, and other plant parts are used in liquid-spill-recovery absorbents, construction board and cosmetics, according to a partial listing from the Center for Crops Utilization Research at Iowa State University inAmes, Iowa.
With all those products depending on corn that is selling at near-record prices, the cost will be passed along to consumers, economists say.
Purdue’s Hurt said that ethanol producers, in the face of increasing gasoline prices, will be able to pay up to $9.78 per bushel for the needed corn and break even on production cost in relation to sales. He said that hog producers would hit a break-even price at $8 a bushel.
Business, Pages 69 on 05/01/2011