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Corn price windfall has downfall sides, too

April 17, 2007|by JEFF SEMLER

It may be the on the cold side for April, but corn-planting is on every farmer's mind here in Washington County, just like it is everywhere else in the United States.

If you are one of those intending to plant corn, the ethanol boom is having a huge impact. Some folks see it as a positive trend, while others see it as a negative. Either way, there is an impact on both supply and price.

Those of you in the grain production, handling or processing business can't seem to keep up with all that is happening with corn, as events and rumors combine to seemingly reshape conditions hourly.

So here we are. We have a situation where, as a country, we expect to plant more acreage to corn than ever. I have heard it's getting harder and harder to even find seed corn - supplies are running short. At the same time, many of the inputs used to grow that corn crop have also gone up, especially synthetic nitrogen.

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At the end of last week, the price for Super Urea was $575 a ton. Across the board, chemical nitrogen prices have almost doubled over the past two years.

Why? That's easy. Nitrogen fertilizer production is linked to its main ingredient, natural gas. It takes about 33,000 cubic feet of natural gas to produce one ton of nitrogen fertilizer.

As the price of natural gas goes up - and we know it isn't coming down - so does the price for nitrogen (N) fertilizer.

But the price of synthetic N can be mitigated. One way is the use of manure. With Washington County being home to some 50,000 head of livestock, we do have a supply to help reduce the need for purchased fertilizers.

However, folks say there isn't enough animal manure to supply it all, and they're right.

Yet the very air we breathe is about 78 percent nitrogen. That's nitrogen that legume plants can efficiently capture and store for subsequent corn crops.

That's right; legume cover crops could be out there working for you at this very moment, capturing nitrogen and putting it where you can use it - in your field.

If you're interested in growing your nitrogen, building up your soil's health and reducing your dependence on chemical fertilizers, then start by using cover crops. You'll be amazed at the significant changes they can have on your soil.

Improving the organic matter content of your soil even a fractional amount per year will improve its water-holding capacity, will improve the plants' ability to forage within the root zone for macro- and micro-nutrients, and, over time, will reduce soil loss from wind or water erosion.

Additionally, we are losing farmland at an alarming rate.

Maryland has 2.15 million acres of farmland, over one-third of the state's land area. Fifty years ago, over half of the state's land area was used for farming.

Maryland now ranks fifth among all states in percentage of land that is developed.

As the farmland base shrinks, the remaining land is being bought or inherited by non-farmers or absentee landlords. This shrinking land base and the increase in property taxes have fueled the increase in rental rates - all resulting in shrinking profit margins for a crop that seems to be experiencing a boom.

Let's put it in the terms of dollars and cents. An acre of corn has the following costs:

· Rent - $50;

· Repair/Maintenance/Interest - $25;

· Fertilizer - $50;

· Fuel - $20;

· Herbicide - $10;

· Labor - $15;

· Seed - $20; and

· Harvesting and hauling - $25.

· TOTAL - $215

So it will cost approximately $215 to grow an acre of corn.

If we get average rainfall, which results in average yield (100 bushels per acre), the income would be $396, given the projected price of corn at harvest. The subsequent profit would be $181 per acre.

At first glance, that seems like a reasonable profit.

The problem is, if we have average prices, our income would be $245 or a profit of $30 per acre.

And even with this year's projected higher corn prices, if the average size farm in Washington County planted all of their 152 acres to corn, their annual income would be $27,512 before taxes.

This would be just slightly below the personal per capita income in Washington County of $28,839 in 2004, the latest year for which that figure is available.

So my point is, regardless of how high you hear corn prices are, farming is still no get-rich-quick scheme.

It is hard work for what might be thought as meager returns.

While corn prices remain volatile, they will normalize - read "drop" here - and input costs will not drop at the same rate, if at all.

In the words of President Eisenhower, the moral is, "Farming looks mighty easy when your plow is a pencil and you're a thousand miles from the cornfield."

Jeff Semler is an Extension educator, specializing in agriculture and natural resources, for the University of Maryland Cooperative Extension. He is based in Washington County. He can be reached weekdays by telephone at 301-791-1404, ext. 25, or by e-mail at jsemler@umd.edu

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