January 17, 2006

Ethanol might eat into US feed corn production

US farmers deciding whether to plant corn or soybeans will consider a new factor this year - the rising demand for ethanol.

Ethanol is derived from corn and prices of corn are going up now that anti-pollution laws require ethanol to be blended with gasoline. Farmers expect corn prices to strengthen further soon if oil prices remain high, according to a report by International Herald Tribune.

Prices of ethanol increased by 176 percent from 2004 to 2005 from US$0.26/litre to US$0.46/litre.

Agriculture experts are saying that farms cannot feed humans, animals and motor vehicles at the same time. In fact, experts are predicting that in a price war for corn between the food industry and the oil industry, it is almost certain that the latter will win. Fears are also raised that in future, corn prices will reflect the instability of oil prices.

Some academics are saying it might be possible even for the corn producing regions to lack sufficient corn for animal feed as most will go to ethanol. Eventually, experts say American corn exports could fall due to the sheer demand for ethanol at home. A sharp increase in the number of ethanol plants in the past year in Iowa State, a corn-producing region, is evidence of that trend.

However, many farmers in the American corn belt say they have enough acreage to grow enough corn for both fuel and consumption needs.

Experts are also pointing to soyoil as another bio-fuel that will leave about 80 percent of the bean for cattle feed. More demand for soyoil as a diesel substitute would force production of soymeal and thus make cattle feed cheaper.