Michigan corn growers gleeful as ethanol pushes up price

Michigan corn growers are finding their fields turning to gold as prices rise rapidly because of the growth of ethanol production.

Many farmers complained when rain kept them out of the fields and delayed the harvest.

But the wait is paying off, as corn prices rose from $1.85 per bushel in August to $3.50 per bushel in October, the Kalamazoo Gazette reported Sunday.

Corn-based ethanol is being promoted as a way to reduce U.S. dependence on foreign oil.

The higher prices are holding steady on the futures market as well, benefiting farmers who want to negotiate the sale of next year’s crops even before they are planted.

“This is not a bubble, that’s the huge thing,” said Allegan County Agriculture Extension agent Paul Wylie.

The high prices and the driving force behind them represent “a sea change,” Wylie said, and are creating a large-scale shift in agriculture that may be felt at every level of production and use.

Ethanol is being used to supplement petroleum-based fuels and now makes up 10 percent of gasoline at the pump. Advocates say they are looking for that percentage to rise.

“We wanted 7.5 billion gallons of biofuel (nationally) by 2012,” said Michigan State University agriculture economist Jim Hilker. “We’ll hit that number probably in 2008.”

The federal energy bill passed last year included incentives for the building of ethanol plants, Hilker said.

Gov. Jennifer Granholm this year established a 26-member Michigan Renewable Fuels Commission, a bipartisan panel of state officials, business leaders, farmers and university researchers to promote ethanol and other biofuels.

Michigan ethanol plants, including those in planning or under construction, have the capacity to process 242 million bushels of corn, or 84 percent of the state’s current crop, Wylie said.

That has farmers looking for more land for corn.

“The stars are lining up at this point,” said Rod Stevenson, an area technology development manager with Monsanto Co., which develops and sells seed corn. “With the potential of five or six ethanol plants coming on in Michigan and heavy uses of biofuels across the country … corn will be the crop to produce in 2007,” he said.

One potential side effect: higher prices for meat and eggs.

Maury Kaercher, St. Joseph County Extension director, said corn and other feeds has made up about half of the livestock farmer’s cost of doing business.

“If you double that cost, ask yourself: Would any business be able to take a hit on its profit margin of twice what it was a year ago? Most would say, `No, my margins are not that good,’” he said.

“So maybe you are happy at the gas pump, but what are you going to buy at the grocery store?” Wylie asked.