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U.S. Farmers Give Corn A Rest
Posted By: Ethanol
Date: 3/31/08 at 5:57 p.m. EST
U.S. Farmers Give Corn A Rest
Ruthie Ackerman, 03.31.08, 5:40 PM ETIt looks like American farmers are going to take a year off from their love affair with corn. A government report indicated farmers will increase soybean acreage this year to ease the pressure on nutrient-depleted fields before returning to aggressive corn planting in 2009.
On Monday the United States Department of Agriculture released a surprising report that showed that farmers expected to plant 86 million acres of corn in 2008, which is 7.6 million acres, or 8.0% less than in 2007. Last year’s corn production was the highest since 1949.
Near-term corn futures rose 6.6 cents, to $5.672 per bushel in Chicago on Monday. Joe Victor, an analyst with commodity futures broker Allendale, predicted by that by year-end, a bushel would be worth up to $7.50.
Victor said farmers are plan on planting less corn in 2008 to bring their crops back into normal rotation. Planting too much corn has a negative effect on both the yields of the crop and the soil. In 2008, he said, farmers will plant more soybeans and then in 2009 they'll go back to more aggressive corn acres. Soybeans are used for many of the same things as corn, such as animal feed and an array of food products.
The March Prospective Plantings Report also revealed that soybean acreage was expected to jump 18.0%, to 74.8 million acres. This is an increase of 11.2 million acres from 2007 and is just 1.0% below 2006’s record high.
Deutsche Bank North America analyst Christina McGlone said most Wall Street analysts expected farmers to plant about 87.4 million acres of corn this year.
Wheat acreage is also expected to rise in 2008, up 6%, to 63.8 million acres.
Meanwhile, high corn prices are bad news for food and meat producers. Even with the record amount planted in 2007, corn prices skyrocketed 51.4% in the last year, forcing food companies of all kinds to raise retail prices to offset the higher costs. Meat producers are especially sensitive to high corn prices since corn is a key ingredient in animal feed.
Rising corn prices have been hitting food companies for some time now. Earlier in the month Pilgrim’s Pride, the largest poultry company in the United States, announced it would close a chicken processing plant and six distribution centers, and lay off 1,100 workers, as federal subsidies to ethanol producers pushed corn-based chicken feed prices higher. (See “ Corn Prices Pierce Pilgrim’s Pride”)
On Monday Pilgrim's Pride (nyse: PPC - news - people ) shares sank 0.7%, or 14 cents, to $20.33. In the last year its shares have plunged 38.8%.
In January Tyson Foods (nyse: TSN - news - people ), the world’s largest meat company, yanked its future earnings guidance because of uncertainty around rising commodity prices. Tyson’s shares fell 0.7%, or 12 cents, to $16.01. Tyson’s shares tumbled 17.5% in the last year. (See " Rising Costs Obscure Tyson's Future")
Shares in food maker Kellogg (nyse: K - news - people ) fell 0.2%, or 8 cents, to $52.40, and General Mills (nyse: GIS - news - people ) shares slipped 1.0%, or 58 cents, to $59.48.
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