Jan. 15

Increasing demand for ethanol is helping push corn prices higher, but it´s not the only cause, Bob Stallman, American Farm Bureau president, said during the bureau´s annual convention in New Orleans Jan. 13-16.

Corn futures began trading near record highs after a U.S. Department of Agriculture report released Jan. 11 predicted lower ending corn stocks for this fiscal year.

"We´re entering sort of a new dynamic in agriculture that doesn´t come along very often," Stallman said. "We have a huge new demand in biofuels, which sort of kicked this off, but that´s not the only driver that in out there in terms of high commodity prices."

President Bush and Congress agreed in late 2006 to boost the use of what many consider more environmentally friendly biofuels, like ethanol. The president signed the energy bill containing a renewable fuels standard of 36 million gallons by 2022, a nearly six-fold increase over today´s levels.

With the federal government expressing a long-term commitment to biofuels, production has increased. However, increased ethanol production alone doesn´t explain the price run-up, according to the Farm Bureau.

"The whole price situation has not occurred overnight, and it´s not just one thing such as ethanol that´s at work," said Terry Francl, Farm Bureau senior economist. "The demand for these crops has outrun supply for years."

Soybeans, wheat and cotton also have seen price increases. Agricultural commodity prices are cyclical, and farmers may currently be at a plateau, Francl said.

He projected corn will average about $4.60 per bushel this year and next. Prices recently have topped $5 per bushel.

The recent price spikes, which have sparked concern among consumers and livestock producers, are likely temporary, Stallman said.

"I have great confidence in our ability to produce when given high prices as much as necessary or as much as it takes to produce ourselves back into low prices," Stallman said. "We´ve done it every time, historically."

Two other factors that could lead to falling corn and ethanol prices: technology in the pipeline will dramatically boost corn production per acre, and production of cellulosic ethanol from nonfood crops and agricultural wastes will play a larger role in the future, he said.

The federal government is mandating increased ethanol usage in part because the fuel is believed to contribute less to global warming than gasoline produced from petroleum.

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