With competition for acreage among the various crops expected to reach a fever pitch this spring, it’s anyone’s guess as to the direction of corn acreage for 2011.

However, it can be said with some certainty, at least for the foreseeable future, that price and demand for corn will be good.

The forecast for 2011 shows an increase in the demand for corn, according to University of Georgia Extension economists Nathan Smith and Amanda Smith. Some recovery was expected infeed and exports last year, but the rebound appears to be poised more for 2011, say the economists in their annual corn outlook.

Industrial use of corn driven by ethanol grew significantly (by 23 percent) in 2010 to 4.6 billion bushels. The expected increase in 2011 is slowed to 5 percent, reaching 4.8 billion bushels.

“Corn acres in 2011 will need toincrease to meet demand. Record corn consumption is forecast in 2011 due to a rise in feed use as well as food and industrial use. If expectations are met, more than 13.4 billion bushelswill be either consumed or exported by the U.S. for the 2010/11 marketing year,” states the outlook.

In order to produce a 13.4-billion bushel crop, U.S. acreage will need to increase at least by 2 million acres assuming a 160-bushel yield.

The short situation in the corn market should support prices which likely will remain at about $5 per bushel or better until the crop is planted, say the economists. Once the crop is planted and acres are increased, the market will be driven by weather and yield estimates.

Carryover stocks are projected to fall by more than 50 percent to 827 million bushels by the end of summer. This would drop the stocks-to-use ratio to 6.2 percent, historically low for corn. A crop much lower than 13.4 billion bushels will create conditions for price rationing to lower demand possibly switch feeding to substitute grains and sources of protein.

“The raising of the maximum ethanol blend to 15 percent for late-model vehicles likely will not have a big affect on ethanol use as it appears to complicate implementation by retailers. Separate pumps for 15-percent blend likely would add costs to retailers, thereby discouraging adaption,” according to the report.

Outside market factors such as fund and speculator trading, oil prices and the exchange rate will continue to cause volatility in the corn market, say the economists. The value of the dollar gained strength in the last half of 2010 as Europe dealt with economic problems. The United States, however, is concerned about deflation, which would hurt the value of the dollar but make exports more competitive. The U.S. economy needs to grow at a faster pace, around 2.5 percent, to maintain employment.

Could be a bidding war

“Soybeans and corn could get into a bidding war for acres as the global situation for soybeans supports prices and U.S. exports. The soybean market will not want to lose acres to corn in 2011, so any increase in corn acres will have to be bid away from soybeans or from another crop,” states the report.

Cotton is expected to grow in acreage so the South is not likely to lose cotton acres to corn, add the economists.

The income picture for the 2011 season is looking better than last year at this time, say the economists. Costs will rise on some inputs but output prices are much better. “Credit availability continues to be a concern as banks have tightened their lending limits and terms. Interest rates likely will rise as banks look to reduce the risk of loans and offset losses from other sectors.”

Variable costs are projected to increase in 2011 by 13 percent for dryland corn and 14 percent for irrigated corn. The decrease is due mainly to higher fertilizer prices, crop insurance and fuel prices. Seed costs are expected to remain the same for most varieties.

According to the report, Georgia growers planted 300,000 acres of corn in 2010 which was down 120,000 from 2009. Higher prices for cotton and peanuts encouraged growers to switch away from corn last year as prices for corn were below the previous year.

“Roughly two-thirds of the corn acreage planted in Georgia was irrigated last year. Irrigated yields and good early conditions led to a record corn yield for the third year in a row for Georgia at 140 bushels per acre.”

Total corn production for Georgia fell to 35 million bushels which is a 33-percent drop from last year. Growers abandoned a higher percentage of acres in 2010, giving a harvested acre estimate of 250,000 acres. The 2010 production represents about 15 percent of the total corn needed for livestock and ethanol production in Georgia.

The report further states that corn prices fell to $3.50 during planting, but recovered as harvest began in the South to reach $4.

“Concerns about U.S. yields sent the corn market upward in September, breaking $5 per bushel and then exceeding $5.50 in October. USDA is projecting the 2010/11 season average price for corn to range between $4.80 and $5.60 per bushel. The average season price for the 2009 crop was $3.55 per bushel for the U.S. and $3.60 per bushel for Georgia.”

Assuming a similar price relationship for next year would result in a $5.20 price mid-point for Georgia in 2010/11. “Prices are up due to domestic and global concerns about supply. The current pace of demand will lead to a very tight situation by the summer of 2011,” say the economists.

phollis@farmpress.com