Grain farmers all across the country are planning to profit from planting more corn acreage in 2007 than they did in 2006, and Trav Bratland expects to be one of them.

“Last year we grew wheat on about 15% of our acres and split our corn and soybean acres about equally on the rest,” says Bratland, who farms in east-central South Dakota, near Willow Lake. “In 2007, we'll be growing about 70% corn, 15% wheat and 15% soybeans, or about 32% more corn in '07 than in '06. We want to go towards 80% corn in the future to take advantage of all the ethanol plants coming online.”

According to a November online survey of The Corn And Soybean Digest (CSD) readers, nearly half (49%) of those who responded indicate they will plant more corn in 2007 than they did in 2006. Of those planning to increase their corn acreage this spring, nearly 80% also plan to decrease their soybean acreage.

Both economics and an increased demand for ethanol are driving the change. “It all comes down to profit margin,” explains Bratland. “At $3.25/bu. for corn, we'd be making about twice the profit we'd expect from soybeans. We think a $7/bu. cash price is about as much as we can expect for soybeans, unless there is a big disaster and South America doesn't raise many beans.”

Cash corn prices are more than double what they were a year ago, notes David Bau, a University of Minnesota (U of M) Extension educator in agricultural business management. “The cash price for corn at Worthington, MN, on Nov. 1, 2005, was $1.41/bu.,” he says. “The cash price for corn as of Dec. 5, 2006, was $3.32/bu., or $1.91 more. That's great news for grain farmers, but not for livestock farmers who need to purchase corn.”

The motivation to grow more corn will increase if prices continue to stay above $3/bu. or if soybean prices fail to increase, says Bau. “For soybeans in rotation with corn, a 48 bu./acre average yield at a $5.50/bu. price would result in a $15/acre net loss,” he says. “It's numbers like those that are going to motivate farmers to plant more corn than soybeans in 2007.”

Data from the CSD survey indicate that grain farmers like Bratland will also benefit from an increased demand in corn from local ethanol production plants. For example, 37% of survey respondents indicate they will sell corn to an ethanol plant in 2007, a 14% increase from 2006.

Bratland says that he sold corn on contract in 2006 to three different ethanol plants, but as of early December he hadn't contracted with any for 2007. “We're hoping to start marketing the new crop at $3.25, but the price isn't there yet,” he explains. “We're also working with a couple of elevators to potentially pick up and deliver our grain to an ethanol plant. That would help us save on our trucking and labor demands, plus they can get a better cash bid from the ethanol plants than I could as a producer. We're also considering selling corn for silage to a local dairy operator.”

Competition from ethanol plants is escalating corn prices in east-central Nebraska as well, according to Zach Suddarth, an accredited farm manager whose employer, Cornerstone Bank, headquartered in York, NE, works with about 90 different farm operators each year. “The local co-op is paying $3.15 for October/November delivery, and we could also forward contract to a new ethanol plant for July delivery,” he says. “Advanced BioEnergy, LLC, in Fairmont is paying about $3.80 (as of early December) for July 2007 delivery.”

Corn prices like that are hard to ignore, says Suddarth, whose bank clients raised about 14,000 acres of corn and 6,000 acres of soybeans in 2006. “Our corn acres are going to be increased about 25% over last year, but we won't be jumping out of rotations in all situations,” he says. “Where we have adequate water from irrigation, we'll grow all corn. Depending on water availability, we may be increasing corn acreage as much as 4,000 acres. This acreage will come out of soybeans.”

In addition to an ethanol plant set to open in Fairmont in July and one currently operating in York, “three more ethanol plants are rumored to be on their way,” says Suddarth. “These would be within a 20-mile radius of York. Currently there are large ethanol plants operating in Aurora and another in Columbus. So if demand from ethanol keeps prices up, we'll re-evaluate our corn rotations after this year.”

Long-term, it's not the bank's intent to increase continuous corn acreage, he adds. “The main goal is to place more money into our clients' pockets and still keep the land in good shape,” says Suddarth. “However, I've been working as a farmland manager since 1988 and we've only sold corn for $3-plus in the summer of 1995, so this kind of profit opportunity doesn't occur very often.”

Prices this year aren't likely to be typical, agrees Gary Schnitkey, a University of Illinois Extension farm financial specialist. In a normal year, he says, growing corn after corn is less profitable than growing soybeans after corn, except on the state's most productive farmland.

Yet, budgets developed with a $2.75/bu. corn price and a $6.25/bu. soybean price indicate that growing corn after corn will likely be more profitable than growing soybeans in 2007 for most farmers in central and northern Illinois, even on some low-productivity farmland, Schnitkey says. “With the prices we're seeing now, it just makes growing corn on corn even more attractive,” he adds. “We could reasonably be looking at $3.30-3.50/bu. corn price in 2007.”

In comparison, soybeans prices may reach as high as $6.50-6.75 in 2007, notes Schnitkey. “At $3 corn, soybeans on low-productivity soils in central Illinois have to exceed $7.32 to be more profitable than growing corn after corn,” he adds, “but current soybean prices (as of early December) are still far from that mark.”