January 29, 2007

US may need to import corn in years to come
 

The US could shift from the world's largest exporter of corn to a net importer as its burgeoning ethanol industry continues to expand, but in the meantime sales abroad are poised to rise as farmers boost acreage to cash in on decade-high prices.

Analysts believe corn export in 2007-08 could be as big as in 2006-07 but there could be a demand squeeze on world corn supplies. The demand for corn-based ethanol could be so strong that the US might one day have to import corn, said Jose Rasco, investment strategist at Merrill Lynch.

This would have a drastic effect on the global corn industry.

Though some do not share this view, but US President George W Bush's recent call to use 35 billion gallons of renewable fuels by 2017 has left many wondering how to make that possible. Even President Bush acknowledged his plan for a five-fold increase in ethanol use would be constrained by the amount of corn that American farmers could grow.

Producing 35 billion gallons of ethanol solely from corn would consume the entire US corn crop at the level currently produced each year about 11 billion bushels.

Though producing ethanol from cellulosic material like switch grass has gained popularity, there is no commercial production at the moment. Also, the process turns out costlier as also more complex.

Incidentally, US exports might decline in coming years but higher corn prices would increase exports from other countries like Brazil which exported about 4 million tonnes of corn last year, according to the USDA.

Corn traders even expect Brazil to become a major corn exporter. Argentina, currently the second largest corn exporter, is also expected to sell more corn abroad.