Corn Hits $6 a Bushel on Tight Supplies
Thursday April 3, 6:56 pm ET
By Stevenson Jacobs, AP Business Writer

Corn Prices Jump to Record $6 a Bushel, Driving Up Costs for Food, Alternative Energy

NEW YORK (AP) -- Corn prices jumped to a record $6 a bushel Thursday, driven up by an expected supply shortfall that will only add to Americans' growing grocery bill and further squeeze struggling ethanol producers.

Corn prices have shot up nearly 30 percent this year amid dwindling stockpiles and surging demand for the grain used to feed livestock and make alternative fuels including ethanol. Prices are poised to go even higher after the U.S. government this week predicted that American farmers -- the world's biggest corn producers -- will plant sharply less of the crop in 2008 compared to last year.
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Article is ok, but doesn't fill in the pieces behind the real story - which is, Why the Drop in Acreage devoted to corn production?

Looks to be a number of reasons:

01 Crop rotation. Running continuous corn results in lower yields per acre, and even those yields require increased applied nitrogen per acre. Either a crop rotation of corn/alfalfa or corn/soybeans is a better bet, with more sustainable, higher yields, with lower applied nitrogen per acre requirements.

02 Applied nitrogen (per acre) costs are way up - no surprise there. So cost reduction is a big thing, and therefore, #1 comes back into play.

03 Virtually all the "bankable" farmland has already been put back into production. Where you (as the farmer) could grab 20, 30, or 40 acres out of "Bankable" land, now it's 1, 2, or 3 acres, and you are scraping edges of grass waterways, reclaiming old building sites, adding an extra crop row along roads. In other words, the farming community is "working the edges" for more crop production, because that's all that is left.

04 Upfront investment costs. Bottom line (and this is from some friends who farm)the upfront costs for corn (vrs. the cash return per acre, based upon historical per acre crop production & current day prices), is that other grain crops such as soybeans are a better deal in the marketplace right now.

In other words; (Upfront money/production costs per acre)/(total anticipated revenue per acre) for corn is higher than for other crops. At least right now, hopefully will change. We'll see.

Congress had better rethink the whole corn based ethanol push, because corn at $7.25+ a Bu. means REAL PAIN for the American consumer. And there will be a pushback.