Less corn planted, despite ethanol

Philip Brewer — Tue, 01 Apr 2008 00:26:51 +0000

Prompted by high prices (driven by demand from ethanol production), farmers planted more acres of corn last year than any year since 1944. This year, though, planned acres for corn are down 8%, and soybeans are back up to normal.

That's the word from the U.S. Department of Agriculture, in their Prospective Plantings, released today.

Because of where I live--central Illinois--last year's huge increase in corn planting was something I could see on a daily basis. Bicycling out in rural areas around Champaign-Urbana, I'm used to seeing soybeans in about a third of the fields. Last year, it seemed to be barely half that.

The usual ratio is a result of the crop rotation that farmers seem to use around here, planting corn two years and then planting soybeans for one year. Corn requires large amounts of (increasingly expensive) nitrogen fertilizer. Soybeans, on the other hand, add nitrogen to the soil. In addition to balancing some of the nutrient demand on the soil, switching to soybeans for a year helps with pest control. If you plant corn year after year, you can expect corn pests to get worse each year. A year of soybeans greatly improves the situation.

Last year, the agricultural radio reports were full of news (and ads) on how to grow corn for a third straight year on the same plot of land. Seeing all that corn was worrisome to me--you could point your finger in any direction and point at agricultural practices that were even more unsustainable than usual.

It seems, though, to have been a one-off move to take advantage of a record surge in corn prices. The (entirely predictable) result has been a surge in the prices of other agricultural products, and farmers are moving things back toward normal. Corn planting will still be higher than usual, but soybean planting (after a huge drop last year) is right back up to recent levels. Other grains show a mixed bag--sorghum and oats are down, barley (important for beer and scotch drinkers) is up, wheat is way up.

With things trending back toward normal, the result will probably be more of what we've been seeing lately--higher prices for agricultural commodities, leading to higher food prices. You can't figure that the current high prices are an aberration; high prices of agricultural commodities are the new normal.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: