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Wet winter, high ethanol costs mean money forcornproducersYUMA, Colo. (AP)--Yuma County farmer Byron Weathers anticipates an unusual event this year: making money on hiscorncrop. Like many of his corn-growing colleagues who have suffered through lean years, Weathers plans to plant more of the grain this spring to take advantage of historically high prices. Colorado farmers will increase theircornacreage this year by a projected 25 percent to 1.25 million acres, the second-highest total since the 1930s, agriculture officials reported in early April. Nationally,cornplanting is expected to grow 15 percent to 90.5 million acres, according to a report from the U.S. Department of Agriculture. Weathers tips his cap to a nearby ethanol plant under construction east of Yuma. "Ethanol is a welcome boost for us," he said. "I've been growingcornfor over 30 years, and it's been pretty tough for a lot of those years." The boon for farmers could come at the expense of cattle feeders and consumers, who are paying for the higher-priced corn. The increased acreage is driven by demand for ethanol. That demand recently pushedcornprices to more than $4 a bushel, far higher than the $1.60 to $3.25 per bushel range for Colorado prices over the past two decades. "There's no question that ethanol is the driving force behind the price increase," said Colorado Agriculture Commissioner John Stulp. "We've created an exciting new market forcornfarmers, and it's a very positive development." Two new ethanol plants are operating in Sterling and Watkins. The Yuma plant is expected to start production this summer, and a second facility in Yuma is preparing to break ground. Another plant has been proposed for Fort Morgan. Their combined capacity of at least 340 million gallons a year would supply all of Colorado's ethanol consumption and make the state a net "The (ethanol boom) growing pains are pretty painful for some of us. If the price ofcornstays high, you'll see fewer cattle feeders here." Much of the gasoline sold in Colorado contains 10 percent ethanol. Ethanol as a gasoline additive reduces auto emissions and extends gasoline supplies. So-called flex-fuel vehicles can run on gasoline or E-85, a mix of 85 percent ethanol and 15 percent gas. State officials and fuel marketers plan to triple the number of E-85 pumps in Colorado by adding 45 new locations by the end of the year. But the push toward ethanol production and resulting highercornprices isn't the windfall for farmers that it might appear, said Bernie Lange of the Colorado Association ofcornGrowers. He noted that production costs such as fertilizer, fuel, seed and equipment have soared in recent years. "The increase incornprices is what we've been asking for all along," said Burlington farmer Steve Scott. "But you've got to remember that our input costs have been rising at an alarming rate." Higher costs also affect the economics of ethanol production. Ethanol critics say the process of distilling fuel fromcornrequires almost as much energy as it ultimately produces. In addition, ethanol-blended gasoline delivers fewer miles per gallon than pure gas. A newer technique for making "cellulosic" ethanol from wood chips, crop residue, waste paper and grassy plants may be more energy-efficient than using corn, but the technology isn't yet economically feasible. Highercornprices have made ethanol production less profitable than it was a year ago. When oil was $70 a barrel andcornwas $2 a bushel, the profit on a gallon of ethanol was $1.06, according to financial analysts at Credit Suisse. If oil is $60 andcorn$4, the profit is 3 cents. Ethanol's stimulative effect oncornprices isn't sitting well with livestock feeders, who rely oncornas a primary ration. Cattle feeder and farmer Brad Rock estimates he was losing $150 to $200 per head of cattle recently whencornprices hit a 10-year high of $4.50 a bushel in February. Despite the highcornprices, Rock and other feeders receive some benefit from ethanol production because its doughy byproduct, distillers grain, can be used in place ofcornfor a portion of cattle feed. Consumers ultimately pay the higher costs ofcornwith increased prices for meat and corn-based food products. But agriculture analysts argue thatcorncosts account for only pennies on every $1 worth of food. The remainder of food prices derive from manufacturing, transportation and marketing. Already, the news of morecornplantings this year has pushed prices down from their recent highs because of projections for larger harvests this fall. Date: 5/3/07
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