Markets nervous: will U.S. plant enough corn?

By Carey Gillam

WHITE CLOUD, Kansas (Reuters) - Kansas farmer Ken McCauley wants to help keep the world from going hungry next year, so he's planting corn: lots and lots of corn.

The third-generation farmer said he'll begin seeding about 3,000 acres of corn on his northeastern Kansas farm within the next two weeks, compared to only about 1,000 acres of soybeans he'll plant this spring, a change from his traditional 50/50 mix of the two key crops.

Indeed, with food prices racing higher around the world, and strong demand for corn from food companies, livestock producers and ethanol makers, U.S. corn production is considered a critical component of keeping people fed.

Higher prices for corn have fattened farmer wallets even as stocks from last year's bumper crop remain sufficient for the short term.

But as spring planting season draws near, now market analysts fear that many U.S. farmers will not follow McCauley's example but will instead plant soybeans, which are commanding historic high prices at more than $13 a bushel (compared with $5.50 a bushel for corn) and are much cheaper to produce than corn.

Market experts say all signs point to a sharp decline in overall U.S. corn seeding this spring, which could spell a significant tightening of supplies that would resonate at home and abroad, impacting everyone from consumers to cattle feeders.

"We have tight stocks worldwide and strong demand, so when there is an acreage or production shortfall you end up with more extreme and violent moves in prices. This is the risk that we face," said agricultural economist Bill Lapp.

On Monday, the U.S. Department of Agriculture will issue a report laying out its latest estimates for this year's seeding of key corn, soybean and wheat crops.