While corn is still the major feed grain for ethanol production, output expansion for corn-based ethanol will be slow, according to a US Department of Agriculture report released on February 13.

According to USDA's Economic Research Service annual baseline projections for the next decade, or 2008 to 2018, the use of corn in ethanol production will increase in 2009 and 2010 compared with 2008. But the industry's expansion will slow as close to one-third of total corn use is expected to go to ethanol production in the 2008 and 2009 crop year. Ethanol production in the US in general has increased rapidly over the past several years, from less than 3 billion gallons in 2003 to over 9 billion gallons in 2008.

These projections also include tax credit available to blenders of ethanol and the 54 per gallon tariff on imported fuel ethanol remain in effect. While expansion in the ethanol industry continues, smaller gains for corn-based ethanol are projected, largely reflecting moderate growth in overall gasoline consumption in the US. By the end of the projection period, USDA states that ethanol production will account for about 35 percent of corn use and corn-based ethanol production exceeds 9 percent of annual gasoline consumption. The continued presence of ethanol demand in the corn sector, in combination with other long-term factors, holds prices for corn and many other crops well above their historical levels, although season-average annual prices are not projected to reach the record highs seen in the first half of 2008.

The domestic corn use throughout the projection period largely reflecting increases in corn-based ethanol production, according to the report. The increases will continue over the over the next 10 years, although the pace slows from the rapid gains of the past several years. Projected gains after 2009 and 2010 are largely in line with moderate expected increases in overall gasoline usage in the United States.

The USDA also sees bottoming out of feed and residual use of due to reduced meat production and increased feeding of distillers' grains, a co-product of dry mill ethanol production, the report states. However, feed use will rise as meat production picks up and growth in availability of distillers grains slows with the reduced pace of corn-based ethanol expansion.

Gains in food and industrial uses of corn other than for ethanol production will be smaller than increases in population, according to USDA data. Consumer dietary concerns and other changes in tastes and preferences limit increases in the combined use of corn for high fructose corn syrup, glucose, and dextrose to about half the rate of population gain. Starch use initially declines due to the slowing US economy, but grows moderately thereafter.

Finally, global economic growth underlies increases in US corn exports, according to the USDA. In response to stronger global demand, US corn exports will feed grains to support growth in meat production, with the US share of global corn trade holding in the 55 percent to 60 percent range.