Corn prices boosted by ethanol industry

US - Crop prices near $135 per ton in Manitowc Co.
calendar icon 1 February 2007
clock icon 2 minute read
The rapid growth of the ethanol industry appears to be one of the primary reasons for major escalation in corn prices over the past four months.

"Corn last fall around harvest time was selling for $85 to $90 a ton in this county," said Scott Gunderson, Manitowoc County University of Wisconsin-Extension dairy agent. "It's now probably around $135 a ton. It went up that much. I'm not going to say that all of it is due to ethanol, but a big push is ethanol production."

Corn prices have continued to increase despite a bumper crop in Corn Belt states such as Iowa and Minnesota, said Kevin Jarek, Outagamie County University of Wisconsin-Extension crops and soils specialist.

In the fall of 2005, corn was being delivered to grain elevators for $1.38 a bushel, but by the end of the last harvest year it was $1.80 a bushel, Jarek said. He added that March futures contracts for corn, sold in stock and commodity markets, has climbed to $4 a bushel.

That means bidders are offering now to pay $4 for a bushel of corn in March, predicting that the market price for the same bushel of corn will then actually be much higher.

Tightening old crop supplies and strong demand for corn to produce ethanol, a 200-proof alcohol fuel made from distilling corn, are believed to be behind the price jumps, Jarek said.

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