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Gold-Rush Fever Down on the Farm: Soaring Price of Corn Creates Boom Times

Posted on: Monday, 5 March 2007, 06:00 CST

By Greg Burns

WATERMAN, Ill. -- Bert Huftalin will be spending money to make money this spring, crisscrossing his fields on a massive new tractor dragging a 16-row planter to sow the latest high-tech seed.

Altogether, the new gear will tie up nearly $200,000, but with corn prices near their highest levels in a decade, every extra bushel Huftalin can squeeze from his acreage represents pure profit. "It's an exciting time to be in agriculture," the Malta, Ill., farmer says.

Corn fever has brought a gold-rush mentality to the heartland. Companies making equipment, fertilizer and seed are seeing a boom in sales ahead of spring planting. Farmers and investors are bidding up the value of Midwestern farmland at the fastest rate since the 1970s and bankrolling the construction some 78 new facilities for turning corn into fuel.

Fast-growing production of ethanol could keep grain prices high for years, which in turn would mean higher prices for meat, dairy and eggs now that corn and other livestock feed has gotten so expensive.

With stockpiles of grain unusually low and demand surging, corn farmers almost can't miss. "I don't know if I'm ready to quit Wall Street to farm, but now would be the time," says analyst John McMillin of Prudential Equity Group. "They're in a sweet spot right now."

Huftalin is banking on his new high-capacity equipment to get his fields planted faster than ever during the iffy spring weather. He will be using cutting-edge hybrid seeds genetically engineered with not one but three traits for discouraging weeds and insect pests. And as each kernel enters the dirt, a tank-and-drip-tube system on his new planter will automatically deliver a drop of fertilizer, "To help it pop up," he explains.

He is unusual, however, because he will be shifting only 60 to 80 of his 2,100 acres from soybeans to corn. Across the country, 12.4 million additional acres will be seeded with corn because prices look so favorable, according to the Allendale Inc. research firm.

The same acre that generates a $249 profit from soybeans will return $338 if planted with corn instead, a University of Illinois report suggests. That's a far greater spread than the usual $20-per-acre difference between the two crops over the previous five years, says extension specialist Gary Schnitkey.

His advice: Consider planting every available acre in corn.

At the same time the corn boom offers such promise for the region's farmers, it poses a threat to its livestock producers. In some cases, the same operation will be winning on one hand while losing on the other.

Huftalin, for instance, will be struggling to stretch the rations for the 10,000 hogs he plans to raise this year, feeding the growing animals wheat and leftovers from ethanol distilleries as substitutes for costly corn.

At the Ho-Ka Turkey Farm nearby, manager Tom Klopfenstein already plans to charge more for his 75,000 premium birds come Thanksgiving. "There's no way around it," he says.

Seed production expanding

Monsanto's seed production facility in Waterman is humming, preparing special orders and shipping a record number of one-ton hoppers loaded with seed corn to its increasingly large-scale customers.

The coming harvest season will be even busier, and construction is proceeding feverishly on a $20 million expansion.

Every fall, a bottleneck develops at the corn dryers, where freshly shucked ears are tossed into heated bins for three days at a time to remove moisture. The current building project includes 30 additional bins, up from 18, to handle the much larger crop expected this year.

"Sales are very strong," says site manager Clinton Rauch, as he tromps through the mud and slush left behind by the construction equipment. "Very strong."

Inside the facility's cavernous warehouse, forklifts load heavy pallets of seed onto trucks for delivery to waiting farmers, whittling down a towering inventory stockpile.

Yellow and green bags whiz by on conveyors that slice the bags open and dump out their contents so they can be sprayed with insecticide, an add-on precaution proving popular with customers this spring. Rauch's plant hasn't handled ordinary, untreated corn in years, and the kernels rattling through its sprayer system already have been genetically engineered to deter rootworm pests.

Such specialized products have helped put Monsanto on a roll. The St. Louis-based biotech company's DeKalb and Asgrow brands have gained market share as farmers trying to squeeze every last bushel from their acreage pay top prices for the most-promising seed.

Farmers determined to boost yields will also be taking extra care this spring to cram more seeds onto each acre, fertilize efficiently and apply fungicide at the first sign of leaf disease. With corn prices so high, the thinking goes, additional effort and expense will pay dividends.

"The technology is so much better, we can count on better yields," says Ed Arndt Jr., an Illinois farmer who also operates a family seed dealership.

Although a pedigreed product can cost twice as much as unheralded varieties lacking built-in protection against weeds and pests, price is barely a consideration, Arndt says. "If your farming community is suffering, people ask the price. Now price isn't nearly the issue. Agriculture has been pretty good to people."

Not everyone is celebrating.

DuPont's Pioneer Hi-Bred International, long the seed industry leader, has come under pressure from Monsanto. In response, Pioneer is closing or cutting back 10 plants and eliminating 1,500 jobs, while at the same time adding more than 400 positions for research and development in plant genetics and biotechnology.

In the current go-go environment for corn, "it's all about product quality," says Dean Oestreich, president of Pioneer, which markets more than 240 different corn hybrids in a bewildering assortment of technology traits and characteristics. "The high-tech products are in high demand."

Farmers generally have the wherewithal to pay. Soaring crop prices are expected to push overall farm income up $6 billion, to $66.6 billion, in 2007, according to an Agriculture Department forecast.

Already, farmland prices and rents are rising. The Federal Reserve reported a 9 percent increase in the value of productive acreage across a wide swath of the Corn Belt in 2006, extending the strongest stretch of gains in 30 years.

Also increasing land values is the likelihood of continued federal subsidies for crop farmers already enjoying widespread prosperity.

If the 2002 Farm Bill were simply extended for another five years, farm payments would drop precipitously because of high crop prices. But lobbyists who not long ago were pushing for a simple extension now want a rewrite. And with farm votes up for grabs in the coming presidential campaign, observers expect plenty of tax dollars for agriculture.

Fat times on the farm will lead to only marginal changes in the structure of farm programs, predicts Daryll Ray, agricultural economist at the University of Tennessee. "It's the same old deal. When conditions are good, this proposal will make it better."

Harder to predict is the perennial wild card in the farm game: Weather.

Officials at the National Oceanic and Atmospheric Administration have announced that last year's El Nino appears to be giving way to La Nina. These phenomena, which involve the heating and cooling of waters in the equatorial Pacific Ocean, can have profound effects on Midwestern weather.

Typically, La Ninas mean a warmer spring and summer and dryness in the central Plains during the fall. But at the moment, the balance between El Nino and La Nina makes conditions more difficult than usual to forecast.

Even with normal weather, crop prices will be "pretty good" for the next couple of years as demand rises for ethanol, livestock and exports, said Ray. And if a drought should strike in the central U.S. growing region, the impact will be as swift as it is predictable, he says: "Corn prices would explode."

gburns@tribune.com

Source: Chicago Tribune

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