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Tuesday, March 27th, 2007

Farmers to plant more corn; market says store it

By Nancy Allen
Early USDA forecasts indicate that farmers nationwide will plant more corn acres this year to cash in on high market prices.
If those predictions bear out, grain elevators that accept corn likely will be strained trying to accommodate this additional production, and the Grand Lake area is no exception, said Mercer County Farm Service Agency Executive Director Chris Gibbs.
For some producers, the answer may be adding more on-farm grain storage, which also will enable farmers to hold onto their corn and sell it next year at an even higher price than it is now, Gibbs said.
On April 3 the Mercer County FSA office will hold a meeting in Celina on the USDA's Farm Storage Facility Loan Program, which provides low-interest loans to pay for grain storage structures.
The reason for current high corn prices is largely because the increasing demand for corn for ethanol production. The price farmers are getting at elevators for corn has doubled during the last two years to $4 or more.
"Even the 2006 crop was good enough that we saw times when local elevators weren't able to receive the corn producers wanted to ship, particularly in eastern Mercer County," Gibbs said.
Overall, Gibbs does not expect a significant jump in corn acres in the county because livestock farmers are more likely to stick with existing corn to soybean rotations for the long-term health of their operation, rather than "chasing high corn prices."
However, outside the southern, livestock-rich portion of the county, producers may find it easier to change their crop rotations to add more corn. But before they do that, farmers first will look very hard at this year's wheat stands, he said.
"Those that didn't do well will go to corn in a heart beat," he said.
Gibbs said the market is sending strong signals to producers to store their corn.
Chicago Board of Trades futures prices indicate a 20 cent increase in the price producers would get for their corn between December 2007 and July 2008.
In addition, the basis price, which is a figure derived by computing the difference between the future's price and the local cash elevator price historically widens in the fall at harvest when there is a larger supply of corn, and narrows in the summer. A widening basis is a clear indicator that farmers should store their corn crop.
And this year, if prediction of more corn acres materialize, the basis levels will be even wider than normal.
Without on-farm storage, the increase in the base price and in the future's price is largely lost, Gibbs said. The only other option for producers would be to pay elevators a fee to store it there.
"Onfarm storage has always been a good investment and I suspect it always will be,"Gibbs said.

Program set on USDA grain storage loans:What: Program about the USDA's farm storage facility loan program.
When: Tuesday, April 3, 7:30-9 p.m.
Where: Mercer County Central Services Building, Celina, first floor conference room
For more info: Call the Mercer County Farm Service Agency office at 419-586-3149.
The USDA's Farm Storage Facility Loan Program offers a seven-year loan with a 15 percent down payment. The USDA will loan on 85 percent of the total cost of the structure, including labor.
The interest rate for loans approved in March is 4.75 percent. The program is for new structures or refurbishing existing structures with new equipment. Loans cannot be made for used structures, but they can be made on a new foundation, floor, bolts or any internal equipment purchased new to be placed in a used structure.
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