Coast to coast corn
By JIM VERHULST
Published April 8, 2007
We normally don't spend a great deal of time worrying about the corn crop in Perspective. But with demand for ethanol rising - remember, it powered the Indy Cars at last week's Grand Prix of St. Petersburg - it is, in turn, raising the need for corn, so much that the U.S. Department of Agriculture has just estimated that farmers will plant more corn - 90.5-million acres' worth - than anytime since 1944, the crop that would have gone in the ground just before D-day.
That is so much acreage that every man, woman and child in America could have a plot the size of two typical city lots. What does this mean for farmers themselves?
I have two brothers who farm hundreds of acres and raise thousands of hogs in Prophetstown, a small town in northwestern Illinois, a state that is always one of the top corn producers. My oldest brother, 58-year-old Larry, has been farming for four decades. Our other brother, 56-year-old Bob, joined him in a partnership some years later. They will start planting the spring crop later this month. I e-mailed them some questions. Larry offered most of the answers.
Has the demand for ethanol raised the price of corn?
Since last September (when the last corn harvest began), the price per bushel has risen by $1.50 to $2. But in the last two weeks, the price has actually decreased by about 60 to 70 cents per bushel. If we were selling a bushel of corn for cash right now (Friday), we'd get about $3.47 here, depending on exactly where we decided to haul it for sale. Demand for ethanol, of course, explains part of the price increase. But it's also about supply and demand. Now that farmers have said they are going to plant so much corn, the pressure is off a bit, which accounts for the recent price drop even though there is so much demand now for ethanol.
How has the price of a bushel of corn changed over the years, say from when you started farming? How much has it gone up and down?
In the time I've been farming, I've gotten as little as 75 cents a bushel and as much as $5 a bushel. And the price goes down just about as often as it goes up. So these recent high prices aren't a record high - and none of this is even adjusted for inflation. Most of the time, the price per bushel has been $1.75 to $2.50.
Wait, you mean even at the recent higher price it's still cheaper to buy a bushel of corn now than years ago?
Ten years ago the price was high because of a short supply. This time the price is higher because of increased demand (ethanol).
If the prices really haven't gone up much, how do you guys make a living at this?
Farm size has increased to offset lower margins with more volume. Remember, when we were all growing up, a 240-acre farm supported Mom and Dad and us four kids, and we had cattle, pigs, chickens, oats, corn and soybeans - a little bit of everything. That doesn't work anymore. It's much more specialized. We now have just hogs and corn and some soybeans; we have to farm on a much larger scale. Everything is bigger, you need more equipment and it's all much more expensive.
It's all volume, then? Get big or get out?
Some farmers have increased their size. That's why you'll see so many abandoned farmsteads. One farmer might farm the land that used to support several farm families. Other farmers - particularly grain farmers who don't raise livestock - have taken jobs off the farm to make a go of it.
How much have the yields increased over the years?
Thirty years ago, we might have gotten yields of 125 bushels an acre. Now we might get 180 bushels. Of course, a bad year - too much rain, too little rain, hail, whatever - can still wreck a crop and cut the yields. But modern strains of corn and ever more scientific farming mean those yields pretty much just keep going up.
How has your own volume, in acreage and heads of hogs, changed over the years?
I started with 120 acres and 500 pigs per year. The family partnership (Bob and I) now has 1,160 acres and 13,000 to 14,000 pigs per year.
How different is farming from when you started? What have been the big changes over the years?
The big differences have been the size and technology. Everything - the tractors, the costs, the amount of land, the scale of all that we do - is just so much bigger than it was decades ago. And the technology ... For example, we use GPS systems to constantly monitor our yields as we harvest, down to a few square feet. Then we use the computer to map everything out. So when we begin to plant the crop the next spring, we can use those maps to pinpoint any problem areas. And we use soil tests to know exactly how to adjust the fertilizer, pesticide and herbicides in each little square of land to maximize the yield and yet to use as little of those chemicals as possible. They're expensive and the EPA doesn't want us to use any more than the exact right amount. That's one example of the technology. Some farmers have more expensive GPS that will actually take over the steering of the tractor and will be accurate to an inch or two.
You can do three things with corn, right? Sell it for cash, sell it on contract for delivery at a future date at an agreed-on price, or feed it to your own livestock? What do you do?
We feed most of the corn we grow to our pigs, so the demand for ethanol hasn't changed our plans too much. We can adjust the size of the herd a little bit but we can't suddenly stop raising hogs and start selling the corn for cash. Farmers can sell corn at harvest time or they can store it in bins. Corn prices change daily. You can also price it for future delivery - sell it on contract.
What's the cost per acre to buy and plant the seed, fertilize the soil, control pests and harvest the crop?
Probably $475 to $500 an acre.
This is all field corn, right, not the kind people eat? What's a kernel of field corn feel like and taste like? If it's not used to feed livestock or to make ethanol, what is it used for?
It would be hard and would taste really starchy if you tried to chew a kernel. I don't recommend it. Field corn is also used in some processed food products and some manufacturing.
So are you guys getting on this ethanol bandwagon, planting a kernel of corn in every clod of dirt?
No, not really. As I said, we'll feed most of the corn to our hogs in the hopes that hog prices will be pretty good. There are some new ethanol plants to be built in our area, but most corn grown here is shipped down the Mississippi and Illinois rivers. Some is shipped by train.
Ethanol is sometimes billed as a step toward energy independence. With the energy used to plant and harvest the crop, do you have any sense of the net gain if the crop is used to make ethanol?
For every 4 gallons of ethanol produced from corn, about 3 gallons - or its energy and cost equivalent - is used to grow the crop and make the ethanol. It's not the most efficient way to do it. But for now, the way the technology works, corn is the easiest large-scale crop in America to use for ethanol. Long term, other crops might make more sense.
In the future, more ethanol will probably be derived from cellulosic materials like cornstalks, switch grass, woodchips, etc., and the potential net energy gain from them is far higher.
Summarize the planting and harvesting cycle for us. How many times does a tractor crisscross a field in the course of a season and what does it do each time?
Let's see. After the harvest, till the soil in the fall in preparation for the next year. In the spring, apply nitrogen, work the ground, then plant the corn and follow with a sprayer to control grass and weeds. Later, spray again. Use the combine to harvest the grain and then haul the grain from the field. Whatever that adds up to.
For now you're using most of your corn to feed hogs. How many bushels of corn does it take to bring one hog to market? And what is the current price you're getting per pound?
We figure it takes about nine bushels per hog. Currently, we're getting about 46 cents to 48 cents per pound.
So grain farmers have more flexibility to change what they plant to maximize their profit? What are you seeing those grain farmers planning to do this year?
Many grain farmers are increasing their corn acreage and decreasing acreage of other crops, such as soybeans.
By the way, what might a new tractor cost these days? And an acre of ground?
A tractor, depending on its size, will run $100,000 to $175,000. And you can't have just one. Farm ground will run $4,500 to $5,500 an acre around here.
It's not sounding like you'll be retiring to Florida this year, then?
Um, no. But you still have that guest room, right?
[Last modified April 8, 2007, 12:13:14]
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