Air Date: Week of June 3, 2011

Drenching rains left many farmers in the eastern cornbelt with ground too wet for planting corn. Farmers must now decide what to do. As Professor Chad Hart of Iowa State University explains, some will switch to soybeans and others will forgo planting this year and cash in on their crop insurance.

Transcript

GELLERMAN: Midwest farmers have a saying - their corn should be knee high by the fourth of July to ensure a good crop come harvest time. Well, farmers in Ohio and Indiana will have to be very short for that old saying to come true this year. Drenching rains in May left fields too soggy to plant corn seed in those states, and the fallout could be worldwide. Joining me from Ames, Iowa is Chad Hart. He’s a professor of Agricultural Economics at Iowa State University. Professor, welcome to Living on Earth.

HART: My pleasure to be here.

GELLERMAN: So, the saying about corn being knee high, is that true?

HART: Sort of true, now they’d like it to be even taller.

GELLERMAN: They want it to be even taller - how high is it in Ohio and Indiana right now?

HART: Well, in Ohio and Indiana right now, the problem is actually getting the seed in the ground. We’ve had a significant weather problems, delays, and when the fields are too soggy, you can’t get the tractors out there to plant the crops. They are well behind what they’d normally like to see planted.

GELLERMAN: And we’re talking about field corn here, this is not sweet corn-on-the-cob.

HART: That’s correct. In this case, this is field corn, so this is used for mainly either livestock feed or for ethanol production.

GELLERMAN: So in Ohio and Indiana, at what point is it too late to plant corn for the season?

HART: Well, it depends. Agronomically, by the plant itself, they could still be planting into June. The issue though is that a plant will yield less corn the later it is planted. What farmers are looking at right now is, they could still plant the corn and get a reduced yield, they could shift to another crop, potentially soybean, or they could take their ‘prevented planting payment’ if they’ve purchased crop insurance. So, in this case, the crop insurance that producers can buy, has coverage in cases like this, when it’s too wet to plant in a timely manner, and you can receive an insurance payment.

GELLERMAN: So what is the price of corn going for right about now?

HART: For the crop that is being planted right now, it’s being priced in the $6.50-$7.50 per bushel range. The record is almost $8.00, and so we’re about a dollar off that. But historically, we’re more used to $2.50-$3.00 per bushel.

GELLERMAN: Whoa! So producers of this corn can really make a killing in this market!

HART: This year it looks very good. In this case, their costs of production per bushel is probably four to four and a half dollars per bushel.

GELLERMAN: Well, what’s good for the producers is not necessarily what’s good for the buyers.

HART: No, in fact that’s the deal. As you look at these prices, it makes the usage of that corn that much more expensive.

GELLERMAN: How fierce is the competition between ethanol producers and livestock feeders?

HART: Well, I wouldn’t say it’s necessarily fierce, it’s just the idea that when each individual is looking to make that purchase - they all have to figure out, at what price level are they willing to chase this corn at? So far, we’re seeing that they’re willing to pay significantly high prices to obtain that corn.

GELLERMAN: How does that translate to food prices for, well, for me?

HART: For food prices for us, it does have an impact. Arguably with corn, it does take some time to occur, since it is a feed for our cattle, our hogs, our chickens. Eventually these higher corn prices are higher feed costs, which show up as higher livestock prices, which eventually show up as higher meat prices. But, when we look at the overall cost of the farm products going into our food - it’s actually still relatively small. About for every dollar that you spend at the grocery store, 15-16 cents is what’s going back to pay for the farm product in that food.

GELLERMAN: The United States is the world’s number one producer of corn?

HART: Yes we are, we produce about 40 percent of all of the corn worldwide.

GELLERMAN: So what happens here, really does make a difference in the rest of the world.

HART: It does. When you look at corn trade throughout the world, as I say we’re 40 percent of the production, but we’re roughly two thirds of all of the corn that’s traded between countries throughout the world.

GELLERMAN: So we’ve got these soggy fields in Ohio and in China and Europe they have droughts, and since this is an international market for corn, how is this going to play out worldwide?

HART: This is where, when we’re looking at food costs, they vary tremendously worldwide. Here in the United States, our food costs are much less tied to the cost of the commodities going into it. Our food costs are much more impacted by energy costs, by transportation costs, by labor and wage rates. In Africa, there’s a much more direct relationship between commodity prices and food prices.

GELLERMAN: It’s kind of amazing. You have a simple crop, corn, and it gets very complicated very fast.

HART: Well it’s an amazingly, what we call, versatile crop. It can be used in food, in our feed, in fuel, in fibers that means it has variety in values, and that typically means increased price.

GELLERMAN: So, in Ames, where you are right now, I don’t know how tall you are, but is the corn near your knee?

HART: Oh no! Most of the corn out here in central Iowa, I would say is probably three to four inches tall, but it will grow quite quickly over the next month.

GELLERMAN: I heard that corn can grow so quickly you can actually hear it.

HART: That’s what someone said. (Laughs.) I cannot say I’ve actually heard it but it does grow tremendously fast.

GELLERMAN: Well, Professor Hart, thank you so much.

HART: Thank you, sir.

GELLERMAN: Chad Hart is an Ag. Economist at Iowa State University.