Ag Economists Darrel Good and Scott Irwin: Ethanol Demand for Corn Likely to Keep Grain Prices High for Years (and podcast)

GrainNet.com
Date Posted: September 16, 2008

Champaign, IL—An ethanol-fueled spike in grain prices will likely hold, yielding the first sustained increase for corn, wheat and soybean prices in more than three decades, according to new research by two University of Illinois farm economists.

Corn, an ethanol ingredient that has driven the recent price surge, could average $4.60 a bushel in Illinois, nearly double the average $2.42 a bushel from 1973 to 2006, said Darrel Good and Scott Irwin, professors of agriculture and consumer economics.

They say price swings stemming from weather or other market variables could send corn as high as $6.70 a bushel or down to $3, based on a review of market data dating back to the mid-1900s for a report titled “The New Era of Corn, Soybean and Wheat Prices.”
“The extreme low prices in terms of the new era would have been considered awfully good prices in the old era,” Good said.

Soybean prices could average $11.50 a bushel, up sharply from an average of $6.15 from 1973 to 2006, with swings from $8.20 to $19 a bushel.

Wheat could increase to an average $5.80 a bushel, up from $3.24, dipping as low as $3.30 a bushel or as high as $10.15.

Although the forecasts are based on Illinois grain prices, Good says increases will likely be similar on a percentage basis in other grain-producing states.

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