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CUSTOMER'S VIEW
DEMAND FOR ETHANOL IS REVOLUTIONIZING AG PRACTICES
During a recent series of seminars held in Florida and Arizona for farmland investors, the president of one of the nation's leading farm management companies said the increased demand for ethanol is having huge impacts on farm-based practices and prices.

Loyd Brown, AFM/ARA, President of Hertz Farm Management, headquartered in the nation's corn and soybean epicenter of Nevada, IA, said after a couple of decades of "moderate discussion, enthusiasm and use of corn for ethanol," the usage began taking a significant upswing at the turn of the century. Hertz manages over 1,800 farms, representing more than 400,000 acres, in the Midwest.

He pointed to the steeply climbing demand that has seen corn used for ethanol production skyrocket from 600 million bushels to more than 2.4 billion bushels, an increase of 400% since 2000. Ethanol consumed more than 20% of the nation's corn crop in 2006 and new plants and plant expansions will continue to increase corn consumption in years ahead.

That increased demand is making a number of marks on the agricultural community. Corn prices have nearly doubled, going from $1.80/bu. in January 2006, in central Iowa, to over $3.50/bu. a year later. That trend is having significant ripple effects on other ag issues, such as crop rotation, set-aside programs, non-row crop acres and competition to the Corn Belt from fringe areas.

MORE CORN ON CORN
Brown said, "We're seeing more corn on corn and fewer soybean and cotton acres. We're also anticipating some Conservation Reserve Program (CRP) acres will be turned back to cropland and nontraditional corn states convert crops to corn." The USDA planting intentions report released March 30, showed a 15.5% projected increase in corn acres in 2007.

The ripple continues. "When we see higher corn prices, we see higher soybean prices too because this is now a competitive situation for row crop acres," Brown explained. "That is great news for today's farmers and landowners. They are witnessing higher net incomes, higher cash rents for crop acres and a substantial increase in land values."


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