February 21, 2008

Is Ethanol Responsible For High Wheat Prices?

Yesterday I noticed a couple of articles in the news that pointed to ethanol as part of the reason that wheat prices are so high. And again today, there are still more articles saying the same thing.

The biofuel movement is also being blamed, as grain farmers switch from wheat to corn - the main crop used for ethanol.

Full Article

Another article puts it this way.

While their overseas counterparts deal with bad weather and export restrictions, many U.S. wheat farmers have switched to growing corn to meet demand in the expanding ethanol market, Sowers said. The full impact of the wheat shortage hasn't yet reached Main Street, he said. "It will get much, much worse," he said.

Full Article

But are they right?

As I have noted before corn prices were at a low point in 2005 and as a result corn acreage went down in 2006. So any changes that would be seen in planting patterns would have occurred since 2005. So let's look at the numbers for corn and wheat.

Corn Acres Planted

2007 - 93,600,000 acres
2006 - 78,327,000 acres
2005 - 81,779,000 acres

Wheat Planted Acres

2007 - 60,433,000 acres
2006 - 57,344,000 acres
2005 - 57,229,000 acres

All this information can be found at the USDA website.

As you can see the notion that farmers have switched from wheat to corn is simply not true. Like so many of the misconceptions surrounding ethanol is has been accepted as fact and passed on by the very people who are supposed to be impartial and check the facts before they report them.

Update: March 9, 2008

The USDA reports that the acres of winter wheat planted have increased this year by over 1.6 million acres.

Winter Wheat Acres Planted

2008 - 46,610,000 acres
2007 - 44,987,000 acres
2006 - 40,575,000 acres
2005 - 40,433,000 acres

1 comment:

ruffin said...

I'm not sure there's enough information in your post to argue against.

Ratio of corn to wheat acres:
2007 - 1.54:1
2006 - 1.36:1
2005 - 1.43:1

It's hard to make a trend from three points, but the corn to wheat ratio is up a decent amount, and a heck of a lot from 2006 to 2007.

For the winter wheat numbers, I'm not awfully knowledgeable here, but is winter wheat ever double-cropped with corn? If it were -- though I've only seen the winter wheat/soy double-crop suggested -- then you might have to wonder if durum wheat is falling behind to corn from the previous numbers, right?

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