New Reports Discuss Ethanol Industry and Corn Trends

New reports from Iowa discuss the pulls on corn acreage from ethanol and soybean prices.

Published on: Nov 8, 2006

Two reports out of Iowa, one from the Iowa Ag Review and one from Iowa State University's Center for Agricultural Research and Development, look at potential changes in the price and acreage of U.S. corn in the future. Both reports deal with the effects of the ethanol industry on corn.

A report in the fall edition of the Iowa Ag Review, by Bruce Babcock and David Hennessy, points out that although ethanol demands are expected to spur higher corn acreage next spring, farmers will also be taking soy prices into consideration.

In order for farmers to change their corn-soybean rotations, the report says that corn prices would need to climb to at least $3.40 a bushel if soybeans were $6 a bushel, and if soybeans were at $7, corn prices would have to approach $3.80 a bushel to convince farmers to switch to corn.

The hypothesis takes into effect the decline of corn yields when corn is planted in the same field two years in a row. Due to lower yields and higher fertilizer requirements, among other issues, farmers would need a significant advantage in corn prices over soybean prices in order to make the switch, the report predicts.

Another study, from Iowa State University, looks at the ethanol industry's expansion. According to this report, the break-even corn price for ethanol is $4.05 per bushel at the current tax rates and oil and distillers grains price levels.

This projection has ethanol reaching 315 billion gallons, or 20% of yearly U.S. fuel consumption, by 2015. This figure would require 95.6 million acres of corn, an acreage figure far surpassing any in recent years.