“Right now, what you see is the nearby contracts as we go forward are higher or flat, meaning that the speculators of the world think that the prices are going to stay high for sometime which is very unique.”
Texas A&M economist Joe Outlaw says how long corn prices remain at these high levels depends on several things.
“How fast ethanol converts to other technologies and how quickly our producers shift from other commodities to growing more corn.”
Outlaw says that oil prices would have to drop dramatically to make ethanol plants unprofitable.
“They’re going to be pulling corn for quite some time. What would have to happen to kind of shut that off would be oil prices would have to go really low, like $30 a barrel.”
In high price situations, U.S. export markets are usually the first to go, because of alternative markets.
“What we’ve seen this current year is that countries have gone in and pre-purchased corn from us, worried about this higher price and availability next year, so we’ve actually sold more to export markets currently than at any point in time last year.”
Outlaw believes U.S. producers, including Brazos Valley farmers, will be growing more corn in 2007.
“You’re gonna see people who have water, or the likelihood of rain switch from what they’re producing now to corn, because of the prices.”
Dr. Outlaw emphasized that no one was predicting windfall profits for farmers.
“The profitability is basically large for agriculture. It’s large, relative to what we’ve seen in the last 30 years, but is it abnormal for agriculture, yes, is it abnormal for other industries, not at all.”
I’m Joe Brown, looking at Brazos Valley agriculture, From the Ground Up.