The Daily Item, Sunbury, PA

News

February 14, 2011

Corn buyers be prepared for higher prices

— SUNBURY — Valley farmers who harvest grains like corn, soybeans and wheat for sale on the international market are possibly looking at record profits this year, in terms of harvest per hectare, and that’s very good news.

But farmers who depend on buying grains — corn in particular — to feed their livestock will find the near-record prices worrisome and a real danger to their bottom line.

“If you’re a buyer of corn, you’d better be prepared to open up your pocket books,” said Mark O’Neill, a spokesman for the Pennsylvania Farmers Association. “This is something livestock farmers have a real concern about. It’s real bad news for those in the chicken industry, for example.”

That what has farmer Willis Franklin worried.

Willis and his father operate a small chicken farm near Beavertown and they do not grow their own feed.

“This could bust us, if the price gets too high,” Franklin said. “Our margins are very tight. We buy corn and it definitely is a major cost outlay.”

Corn prices, which usually means the price of corn futures, are tied to energy prices, because corn is used to make ethanol, an additive in gasoline.

Corn prices peaked in June 2008 with the Iowa floods at around $7.88 a bushel, then fell in late 2008 and early 2009 as commodity prices and oil prices declined, a result of a slowing economy brought on by the 2008 recession.

Now the price has spiked to as high as $5.75 a bushel.

U.S. corn production last year was a record 13.1 billion bushels.

Although this year’s production is 400 million bushels less, the increase in the use of corn for ethanol accelerated the decline in inventory.

And this year, because of the drought in Asia, China will be a major buyer, driving up prices even further.

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