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Impact of corn prices boom on other farming activities

Friday, February 23rd 2007 - 20:00 UTC
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Corn grain prices have reached a historical level of 123 Chilean pesos, approximately 25 US cents per kilogram, a 73% rise from 2006 figures. This significant leap is a result of the growing ethanol production in the U.S. for which the cereal is essential.

In 2006 there were 100 American ethanol distilling plants. It is expected that this figure will rise by 50% this year, increasing the demand for corn. Experts say the U.S. may even run out of grain in 2007, which could open the possibility of Chilean farmers exporting to the U.S. A direct consequence of this is the rise in the corn producers' income. Cultivating one hectare of corn costs around 1,400 US dollars with an average production of 15 tons. Chilean farmers can obtain the 100% of revenues only with a 18 US cents grain price per kilogram. These numbers are making farmers very happy. "I have visited corn producers who are almost giddy," said one agricultural supply company manager. "They are excited after experiencing several years of mediocre results." Experts say corn planting is expected to grow by up to 20,000 hectares (5,000 acres) next year. A significant part of that growth will occur in Chile's Regions VII and VIII. However, Chile's sowing area is limited and the growth of any one particular crop necessarily reduces another or others. "In the short term this is a positive phenomenon because it allows farmers to have better incomes" said Chile's Beetroot Producers Federation president Jorge Guzmán. "However it creates an uncertain scenario in the long term. If the market drops, several beetroot processing plants might have to shut down." The rise in corn prices not only threatens competing commodities but it also affects livestock farmers. More than 60% of production costs of pork, chicken, or turkey meat come from buying corn. Javier Covarrubias is an associate of Chorombo Agrícola, a company producing pork and chicken related products. "We are about to enter a difficult stage. There will be pressure on white meat production costs but we are still not sure of when or at what extent that will happen," he said. By Paulo Guzmán The Santiago Times

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