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Tech Industry

Ethanol fuels huge corn planting

U.S. farmers plan to cash in on the fuel ethanol boom by planting the most crops in 63 years.

U.S. farmers plan to cash in on the fuel ethanol boom by planting the largest area of corn in 63 years, potentially yielding a record crop and calming fears that renewable fuels will steal grain needed for food and feed, the federal government said Friday.

At the Chicago Board of Trade, corn futures prices plunged the daily trading limit of 20 cents a bushel on prospects for a huge crop. Prices for this year's soybean crop fell as much as 33 cents a bushel, and wheat was down 27 cents a bushel.

Yet even with record output, this year's corn crop could sell for a record $3.50 to $3.60 a bushel at the farm gate, market watchers said. Corn prices on the cash market have doubled since last fall due to explosive growth in the ethanol industry, driving up costs for cattle, dairy, hog and poultry producers.

Based on a survey of 86,000 farmers earlier this month, the Agriculture Department projected corn (maize) plantings of 90.454 million acres, which would be the largest acreage since 1944. With normal weather and yields, the harvest would be 12.5 billion bushels--700 million bushels more than the record set in 2004.

"With a medium yield, we could get just about enough corn in the year ahead," said private consultant John Schnittker. USDA forecasts corn usage of 12.3 billion bushels in 2007-2008, including 3.2 billion bushels for making ethanol, up 1 billion bushels from the 2006 crop.

Farmers could collect nearly $46 billion with a mammoth corn crop, said Ann Duignan, an analyst at Bear Stearns, "which in our view is positive" for sales of farm equipment.

The chairman of farm equipment maker Agco, Martin Richenhagen, said when farmers are flush with cash, "they often then invest in equipment."

The Renewable Fuels Association, a trade group for alternative fuels, said with high yields the U.S. corn crop could hit 13 billion bushels. "Such a harvest would meet the needs of all the sectors that rely on it," said RFA.

There are 114 ethanol distilleries in operation across the country which produce ethanol from corn. Production is projected to exceed 6 billion gallons this year compared with 4.89 billion gallons in 2006, and some 3 billion gallons in capacity will be added in 2007, the group said.

Planting intentions are months away from actual harvests.

"The weather is going to drive it all," said Tom Buis, president of the National Farmers Union, pointing to the uncertainties of the growing season.

Growers told USDA they will cut back on soybeans in the Midwest and on cotton and rice in the South to sow more corn. Soybeans are forecast at 67.140 million acres, the smallest area since 1996, while upland cotton would be the smallest since 1989 at 11.855 million acres. Rice, at 2.64 million acres, would have the smallest seeded area since 1987.

USDA forecasts only a modest rise in food prices this year, but said, "With high corn prices increasing feed costs, beef and poultry price increases should begin to accelerate in 2007."

Schnittker said a large corn crop this year would stabilize food prices in 2008.

Iowa, traditionally the No. 1 corn state, would plant 13.9 million acres this year, up 1.3 million acres from 2006, USDA said. Illinois would plant a record 12.9 million acres of corn, up 1.6 million acres, while cutting soybean plantings by 1.4 million acres, the largest decline in the country.