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Sue Martin column: CRP contract holders re-enrolling acreage

There are 36 million acres in Conservation Reserve Program. Last spring, CRP participants paid fees on 13.9 million acres of the total 15.7 million acres set to expire this year. Last summer, CRP participants with acreage set to expire from 2008 ...

There are 36 million acres in Conservation Reserve Program. Last spring, CRP participants paid fees on 13.9 million acres of the total 15.7 million acres set to expire this year. Last summer, CRP participants with acreage set to expire from 2008 to 2010 were asked to express their interest in re-enrolling or extending. To date, those contract holders have paid the compliance fee on 83 percent of the acreage. (10.1 million acres of the 12.1 million acres is set to expire in the period.)

Ethanol production should hit a record of 4.86 billion gallons in 2007, up 24.3 percent from 2005. Ethanol demand gained 33 percent on the year to 5.4 billion gallons. At the same time, imports of ethanol were record large at 653 million gallons. Two-thirds of the imports come from Brazil. By the end of January, there were 114 ethanol plants running with a capacity of 5.6 billion gallons per year. Another 78 plants under construction and seven expansions will add another 6 billion gallons to the national production capacity. In 2007, ethanol corn usage should double, equating to the need for 4 billion bushels.

The trade thinks 88 million to 90 million acres are viaBle, that the need to cut stocks further won't be necessary, but any weather threat or increases in usage should send corn back to the highs. If corn ethanol production increases 50 percent as forecast and exports decline, U.S. total corn consumption could reach nearly 12.3 billion bushels. USDA stocks would decline to 637 million bushels, down from this year's 752 million bushels. Because of tightening stocks, 2007 to '08 prices will need to be strong to continue to pull bean acres again next year.

China's ethanol industry is using as much corn as it can get. Meanwhile, there are rumors that Japan has booked nearly all its corn needs for 2007.

Keith Collins, USDA's chief economist, indicates that U.S. farmers will have to plant 10 million acres more by 2010. That would mean that South American growers gear up more acres to fill the void.

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In Iowa, the combined corn processing capacity for ethanol and other corn-based products soon may be equal to more than half of the 2006 corn crop in that state. If all planned plants are built, processing capacity would be 133 percent of last year's crop in three to five years. On a national level, total capacity could grow to about 40 percent of last year's corn production within the next 15 to 18 months. We have seen record corn production for the past three years, and it appears we still are having a hard time keeping up.

As long as ethanol usage is mandated, how much of an affect are oil prices in decline?

Does acreage need to grow 12 percent to 14 percent to take care of the demand domestically? If so, then the export market will lose some of its share.

Ethanol demand should utilize 4.2 billion bushels of corn. It may be that ethanol production has expanded too fast and may need to go through a period of adjustment before strong growth can resume. If profit margins get too tight, some consolidation may be seen. Ethanol still is a young market.

While the market got ahead of itself in February, new contract highs could be set as the market incorporates greater weather premium.

Money management estimated at 170 billion at end of 2006.

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“In our industry there aren’t a lot of young people in it. I like the fact that there are a lot of young people in agriculture here,” he said of the Mitchell area.