March 5, 2007

 

Booming fuel industry's demand for corn to rise 50 percent next year
 

 

The ethanol industry's hunger for corn should increase 50 percent next year, compelling to higher corn prices and spurring the conversion of more farmland to the crop than previously expected, federal economists said today.

 

US corn acreage is expected to be the highest in 60 years -- 87 million acres this crop year and more than 1 million acres more than the US Department of Agriculture (USDA) predicted just last month, USDA chief economist Keith Collins said.

 

The surge in corn production is aimed at satisfying the growing demand of the ethanol industry. Collins predicted ethanol would consume 2.15 billion bushels of corn in 2007 and 3.2 billion bushels in 2008.

 

Corn prices are expected to remain high at about US$3.60 per bushel, Collins said.

 

Corn prices reached historic highs last week at over US$4 a bushel, more than double the prices from a year ago.

 

Farmers are expected to see net returns of about US$334 per acre for corn next year, a 70 percent increase over last.

 

The effect of the ethanol-fuelled rise in corn prices is rippling throughout U.S. agriculture as more farmers are planting corn on acres that once grew other crops, said Agriculture Secretary Mike Johanns.

 

Being converted are Midwestern soybean fields, Western spring wheat farms and Southern upland cotton.

 

Prices for all major US commodities, except cotton, are expected to rise next year, as farmers trim what has been excess production in other crops to grow corn.

 

However, livestock producers are the losers in the ethanol boom as they reel from high prices of feed which will also translate higher prices of pork, beef and poultry meat.

 

The livestock industry is uniting as a powerful force to lobby for a slow-down in federal support for ethanol production on Capitol Hill.

 

But USDA said increased exports for livestock will help offset their higher costs. The agency revised its previous estimates to forecast US$78 billion in agricultural exports in 2007, the second-largest increase on record.

 

Al Hubbard, presidential assistant for economic policy and director of the National Economic Council, said the agriculture industry is the key in achieving President George Bush's goal of reducing US dependence on oil by 20 percent in the next 10 years.