Corn Expected Above $5.00!

Thus far, this blog has been about economic development, small business, and personal finance, but I realized I've been leaving out a key industry in our community: farming.

With that said, I'd like to share some of what I've been reading lately from Purdue University's Agricultural Department. The Agriculture Department regularly writes on many aspects of farming, including expectations and forecasts for grain, livestock, land prices and rent. As a banker, I've attended some seminars on agricultural lending and crop outlooks at the Purdue campus, and I've always found them to be very high quality presentations.

One article caught my eye a few days ago because it really seems to affect us all. Dr. Chris Hurt of Purdue University wrote, "There is a huge amount of new ethanol capacity coming on line in the next 6 to 12 months. That sharp increase in corn demand along with a smaller 2008 crop due to reduced acreage means there won't be enough corn for the ethanol industry to run at capacity from 2008 crop supplies."

Foreign demand will raise corn prices as well. Professor Hurt wrote, "Corn export commitments to date are running 31 percent ahead of last year while USDA's forecast is only 16 percent higher."

In this price outlook, he writes that corn prices will go above $5.00 per bushel, and he concludes this will make it tough for the livestock industry.

As consumers, we have seen food prices increase recently, and it seems they will continue to increase based on these predictions. Of course, farmers have already seen an increase in input prices across the board. (In fact, fertilizer companies have been good stock picks over the past year. For example: Mosaic Co. ticker - MOS)