Source: Rick Barrett, Milwaukee Journal-Sentinel

October 12, 2013 — Wisconsin farmers could receive much less for their corn this year as a bountiful harvest and reduced demand for ethanol threaten to drive prices down to some of the lowest levels in more than three years.

The harvest is in full swing across the country, and farmers in many states are surprised at the abundance of corn they're getting from their fields.

The best crops in the U.S. are in areas that received adequate rain combined with cooler temperatures at the time the corn pollinated, a welcome sight after last year's mediocre harvest due to the drought withering corn and soybean fields.

The plentiful supply alone could put a damper on corn prices, but this week prices took another hit when the news agency Reuters reported the U.S. Environmental Protection Agency has proposed a surprisingly deep cut in the amount of corn-based ethanol that must be blended into U.S. gasoline next year.

In a historic retreat from an ambitious 2007 law and a victory for refiners, the agency proposes a "significant" reduction in the overall renewable fuel requirements to 15.21 billion gallons, far less than the 18.15 billion gallon 2014 target established by law, Reuters said, citing unpublished EPA documents as its source.

Although the proposal hasn't yet been approved by the White House, corn prices plunged when the news hit the market, falling to $4.33 per bushel by Friday, the lowest price in more than three years, said Walt Breitinger, a commodities futures trader in Valparaiso, Ind.

"Rising ethanol production and corn consumption has been cited as a major factor in high corn prices over recent years, a welcome boost for farmers," Breitinger said.

Whether grain farmers can make a profit on corn that sells for about $4 a bushel depends on their input costs, including the price of seed, chemicals, machinery and fuel.

A Wisconsin farmer's cost of growing corn would be about $3 per bushel before land and labor costs are included in the equation, according to University of Wisconsin-Madison figures.

But fueled by a profitable grain market that included corn to produce ethanol, the demand for farmland has resulted in bidding wars and high rent prices in recent years.

Farmers who counted on getting $6 per bushel for their corn, as they have in some recent years, could be in trouble if the price drops to $4 or less and they're still saddled with high land rents or mortgages.

Land costs are the wild card, said Bruce Jones, an agricultural economist at University of Wisconsin-Madison.