Ethanol Demand Fuels Higher Corn Prices

US - 20 Percent Of Nation's Corn Crop Going To Ethanol
calendar icon 27 January 2007
clock icon 2 minute read
Corn prices have more than doubled over the last year as the demand for ethanol has increased, and that's left dairy farmers with a hefty price tag for feed.

Earlier this year, dairy farmer Hank Van Exel paid $117 for a ton of corn. Now, he's paying nearly $200 a ton.

The reason?

Twenty percent of America's corn crop is going to ethanol, which when added to gas has a low emission and reduces the demand for foreign oil.

As corn prices rise, other commodities will also likely see spikes.

"All the other commodities go along with it -- beans, because a lot of people are forecasting a lot of beans might be taken out for corn," Van Exel said.

Many farmers said they will plant corn instead of alfalfa, cotton or barley.

Van Exel said he expects to plant more corn this spring than ever before, but corn seed might be in short supply.

"So, I think you will see some price increases, so I don't think everybody will be able to plant as much as they would like," Van Exel said.

Corn is the main staple for cattle, as well as for chickens and pigs.

For dairy cows to give milk, it takes about 10 pounds of corn per day. For cattle in feed lots, it takes about 6 pounds of corn to produce one pound of beef, and young cattle that go to the feed lots are now less valuable.

"They've dramatically dropped their price. They've dropped that over 50 percent from what we were getting four months ago because they can't afford the grain prices," Van Exel said.

More than 100 ethanol plants are now in operation, with nearly 50 more under construction.

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