Insight: Chasing high corn prices, U.S. farmers skip rotations

CHENOA, Illinois (Reuters) - Farmer Brian Schaumburg has planted corn for five straight years in some of the thousands of acres he tends in central Illinois.

Farmers who eschew crop rotations that help to replenish the soil with nutrients take a risk that yields will decline. But corn prices soared to a record earlier this year, making so-called corn-on-corn crops a worthwhile bet for many farmers in Illinois, the No. 2 U.S. corn state after Iowa.

"Last year and this year, we're seeing a little yield drag but, even so, corn pays," Schaumberg said from the air-conditioned cab of his crop-cutting combine as he mowed down tall corn stalks, gathering kernels of the yellow grain.

Schaumburg was in the early stages of harvest and so far was averaging roughly 180 bushels per acre in fields that grew corn last year, and about 200 bpa in corn fields that were planted with soybeans last year, with both yields in line with his averages during the previous few years.

"Corn on corn hurts in some places but there's places it's awful good," he said.

Down the road, farmer Dave Eyer was not faring as well. One field that was planted with corn last year yielded roughly 125 bpa, down 30 to 40 bushels from a year ago, after scorching weather in July stressed the crop as it pollinated.

"The plant knew there was something wrong and it only put out so many kernels to be pollinated," Eyer said.

Another field planted for seed corn was expected to yield nothing and Eyer said he would claim insurance for it.

"It was so hot, it killed the pollen," Eyer said. "It's not perfect every year. Weather is still the major factor."

FORECAST FOR LOWER YIELDS

Research firm AgResource Co on Friday cut its yield estimate 2 percent to 145.1 bpa, citing disappointing results from the early harvest. The forecast was below the latest U.S. Department of Agriculture estimate of 148.1 bpa.

Late planting, a lack of rain and hot temperatures have all been blamed for the lower yields. Dry weather can have more of a negative effect on corn-on-corn fields than corn that followed soybeans, said Emerson Nafziger, an extension agronomist at the University of Illinois.

"We are having some areas that have big yield hits on corn on corn. It's pretty specific to dry areas," Nafziger said. "Our working rule of thumb is 10 percent less on yields."

Still, it is a worthy trade-off for many farmers.

"They say corn is king for a reason. It has the highest yield for any of the crops we grow," Nafziger said.

Crop residue, weeds and insects can build up in the soil if farmers plant the same crop year after year. It becomes necessary to plow fields and to apply herbicide, insecticide and fertilizer to maintain yields.

"You have to baby-sit it a little more," said Chuck Kauffman, a seed specialist at Evergreen FS Inc.

Chicago Board of Trade corn futures hit a record of nearly $8 per bushel in June amid forecasts for supplies to fall to the lowest level in 15 years. Grain stocks were thin even in Chenoa, in McLean County, the largest corn and soybean producing county in the state.

"Before harvest started, we had the lowest amount of corn in storage since 2004," said Mark Heil, general manager of the Prairie Central Co-Op, which has 10 elevators in and around McLean County.

Forty percent of the crop is now used in ethanol production while the rest is used as animal feed or food production here and abroad.

GOOD YEAR FOR CORN FARMERS

Corn prices dipped to a three-month low late last week amid plunging equities markets. However, 2011 is still likely to be one of the most profitable year for farmers, many of whom have already sold half or more of this year's crop.

"Farmers are in as good as financial standing right now as they've been in a considerable time, maybe ever," said Tom Kahle, executive vice president and farm manager at Heartland Bank in Chenoa.

Kahle said many farmers, like corporations, are hoarding cash in these uncertain economic times. Growers are willing to plant corn after corn as long as yields do not decrease much beyond 20 bushels versus corn after soybeans.

Nick Chinowth, who farms 4,500 acres in McLean County, said his corn on corn was yielding about 170 bpa and his corn following soybeans averaged about 190 bpa.

The yields were above what he had expected earlier in the season, as moderate temperatures in August and late-season rain combined for a nice finish to the crop.

"One rain at the right time is what made these crops," Chinowth, 30, said.

His father-in-law, Steve Payne, 60, said it was the best year ever for profits.

"Prices have never been this high and, years ago, we didn't have the yields to go with it," Payne said.

(Reporting by Michael Hirtzer; Editing by David Gregorio and Maureen Bavdek)

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