February 28, 2007

US farm group: USDA underestimating ethanol, corn forecasts

The demand for corn from the ethanol industry over the next couple years will be stronger than the US Department of Agriculture is forecasting, the American Farm Bureau Federation said Tuesday (Feb 27).

The group--the largest farm organisation in the US--said its forecast differs from the USDA's annual long-term prediction released in February "due to the underlying assumption about future ethanol production and the impact on the demand for corn".

The US will produce 9.6 billion gallons of ethanol from 3.5 billion bushels of corn grown for the 2007/08 marketing year, the Farm Bureau predicted. That, the group said, increases to 13.5 billion gallons of ethanol the following year using 4.9 billion bushels of corn.

The USDA also predicts rising corn and ethanol production over the next couple years, but to a lesser extent. The USDA forecasts, according to calculations made by the Farm Bureau, are for 8.8 billion gallons of ethanol from 3.2 billion bushels of 2007/08 corn and 10 billion gallons of ethanol from 3.7 billion bushels of 2008/09 corn.

Farm Bureau Senior Economist Terry Francl said he used USDA's corn-usage forecasts to calculate ethanol production.

US farmers are forecast to produce 86.5 million acres of corn this year and 91 million acres next year, the Farm Bureau said Tuesday. That tops the predictions made earlier this month by USDA in its "baseline" report. The USDA said it expects 86 million acres of corn this year and 89 million acres next year.

"Challenges lie ahead for many involved in agriculture, but crop producers who have struggled.