CHICAGO, March 18 (Reuters) - A combination of a long-term warming trends, improved seeds and soaring profits has sparked a "corn boom" in the Northern Plains that might one day turn North and South Dakota into the new Iowa, analysts say.
"All you need to do is look on a research footprint map of the United States and Canada, and compare where we are today to where we were 10 years ago, and you would see the movement from the north to the west," said Paul Schickler, president of DuPont's Pioneer Hi-Bred unit, known also as DuPont Pioneer.
The core of the traditional U.S. Corn Belt lies across Iowa, Illinois and Indiana, the three "I-states" that together produce more than one-third of the nation's corn, used mainly to feed livestock and produce ethanol fuel. Corn is the largest U.S. crop, and the United States is the world's biggest supplier.
Until recent years, corn planting in the Dakotas was limited due to the region's more northern latitude and comparatively dry conditions, both of which shortened the growing season too much for corn. Spring-planted wheat was the favored alternative.
But by 2012, South Dakota had become the sixth-largest corn-producing state, while North Dakota elbowed its way into the Top 10 for the first time, out-producing Wisconsin, where corn is central to the state's dairy economy.
What has changed? The climate, for one. Average temperatures in the Dakotas have been warming steadily for decades, according to weather records, making the region more hospitable to corn. Equally significant, annual precipitation has, on average, increased since around 1990.
Also, farming practices have improved, with seed companies producing corn hybrids customized for the shorter northern growing season.
"We are trying to expand geographies where we can grow corn," said Mike Gumina, a vice president with DuPont Pioneer and a past chairman of the American Seed Trade Association.
While older varieties of corn might take 120 days to mature, Gumina said 90-day and even 80-day varieties today are "fairly commonplace."
The other big change in the last five years is the ethanol boom. Farmers are trying to cash in on corn prices that have doubled since 2006, the last year before a change in the U.S. Renewable Fuels Standard mandated an increase in the amount of ethanol that oil refiners must blend into gasoline.
"There is tremendous demand for corn right now, and certainly corn has risen to the top as the farm product with the highest value and demand," said Nathan Franzen, president of the agribusiness division at First Dakota National Bank in Yankton, South Dakota. "I believe corn has developed into a superior plant because of the wide uses and the flexibility it has."
Still, the allure of ethanol has faded a bit. Falling profit margins and rising corn costs had prompted ethanol manufacturers to idle roughly 15 percent of U.S. plants by January. Several plants have started producing again as margins recover.
Farmers in the Dakotas are expected to earn fatter returns from corn than from any other crop in 2013, just as they did in 2012. As a result, analysts expect farmers in both states to sow a record number of corn acres for a second straight year.
"Based on what I am hearing from our clients today, there will be more corn," said Mike Krueger, president of the Money Farm, a crop advisory service near Fargo, North Dakota.
In North Dakota's Red River Valley, the state's best land for corn, economists at North Dakota State University project that farmers will net $176 per acre of corn in 2013, compared with estimated returns of $122 for soybeans and $86 for spring wheat.
South Dakota farmers planted corn on 6.15 million acres in 2012, up 37 percent from 2006. In North Dakota, corn acreage has doubled since 2006 and quadrupled since 2001.
"We've been planting corn in some pretty adverse conditions for several years, and even in a really tough year, we see a better return (on corn) than some of the traditional crops," said Bart Schott, a farmer in Kulm, North Dakota, and a past president of the National Corn Growers Association.
U.S. farmers planted 97 million acres of corn in 2012, the most in 75 years. Iowa was the top state with 14.2 million acres.
The expansion along the northern frontier of the Corn Belt has been possible because of improved seed hybrids as well as a climate that has grown more hospitable to warm-season crops like corn and soybeans.
Average temperatures in North Dakota have been rising for decades, expanding the state's growing season by 12 days over the past century, said Adnan Akyuz, an assistant professor of climatology at North Dakota State University who is also the state climatologist.
The expansion allows corn plants, which depend on sunlight and warmth to develop, more time to photosynthesize, boosting yields.
Increased average precipitation since roughly 1990 and the adoption of no-till farming techniques that conserve soil moisture have also encouraged corn's spread, according to Jerry Hatfield with the U.S. Department of Agriculture's National Laboratory for Agriculture and the Environment in Ames, Iowa.
Annual statewide precipitation in North Dakota averaged 23-1/2 inches (596 millimeters) in the 1990s and 22-1/2 inches (569 mm) in the 2000s, compared with about 20 inches (508 mm) during the 1980s, according to data from Lanworth, a unit of Thomson Reuters. <TRI.TO
"When you get a little bit more water and you're very conservative with that water, then you can go into crops like corn and soybeans that have a higher water use requirement," Hatfield said.
Climate scientists caution that as the Corn Belt expands northward in coming years, moisture will be a wild card. Temperatures are expected to continue rising, but the wetter trend is far from assured. Corn requires more water than wheat.
"All the models agree that temperatures in the Dakotas are going to warm pretty substantially over the current century," said Gene Takle, director of Iowa State University's climate science program and a coordinating author of the 2013 U.S. National Climate Assessment. "But the real question is whether the drying pattern that is very likely to intensify over the western half of the country is going to dominate."
The expansion of corn in the Dakotas has had significant knock-on effects for farming and energy industries.
The chase for higher returns has meant a massive switch by wheat farmers to corn. North Dakota, the No. 1 U.S. wheat state at 8.530 million acres in 2010, fell behind Kansas in 2012 and seeded only 7.840 million, as its corn plantings rose 75 percent to 3.6 million acres.
"It's amazing," said Lee Weisbeck, vice president with Starion Financial, a bank in Bismarck, North Dakota. "West of the Missouri River has always been spring wheat and sunflowers. And now I've got some producers who are planting 50 percent of their crop into corn, which has never happened before."
Part of the switch has been due to better crop insurance for corn, bankers say. But there has also been a building boom in grain storage.
"When you start planting corn with traditional wheat growers, you get 40 bushel per acre wheat. Then you start getting 130-bushel corn, you need more trucks and bins," said Schott, the North Dakota producer.
The amount of licensed grain storage in North Dakota reached an all-time high this summer at 380 million bushels and topped 400 million bushels by January, the state's Public Service Commission said. South Dakota has 300 million bushels of licensed storage.
Railroads have also kicked into high gear to transport ethanol from the Dakotas to refineries especially on the West Coast.
Is the corn boom here to stay? Frayne Olson, an economist and crop marketing specialist with North Dakota State University extension service, says weather will matter but not as much as prices.
"In the eastern third of the state, guys have made the move to corn and will keep it. The central third will flip ... If we get back to a drier cycle, a lot of that central and western portion will switch back and say corn is risky. But if you have $8 corn, that gets everyone's attention."
Schott, the North Dakota farmer, agreed. Climate change will have less immediate effect than price changes.
"Land costs have been going up pretty fast, so some of these crops are going by the wayside," said Schott, referring to plantings like canola or flaxseed. "With the young farmers coming in, it's all about the bottom line. If it's got red ink, they don't want to plant it."