March 12, 2007

Cargill says high oil price to boost US corn acres
 

US farmers will have to continue planting record-large acres of corn for the production of ethanol if oil prices stay high, Gregory Page, president and chief operating officer of agribusiness giant Cargill Inc. said on Friday.

Page said a US$60 a barrel of oil will have the US yield a crop size similar to what the country is about to expect this year in terms of acres.

Farmers are expected to plant the most number of acres to corn this spring in 60 years due to strong demand for the grain to produce the renewable fuel ethanol in the United States.

The US Agriculture Department has forecast that farmers will plant 87 million acres of corn this year, up from 78.3 million last year. It said 3.2 billion bushels of corn would be used to make ethanol versus 2.15 billion over the same period.

Page said he did not expect any glut in ethanol production in the United States, adding that Cargill has plans to invest US$1 billion in the ethanol sector.

Analysts have said the rush to build new ethanol plants in the United States is expected to outpace demand this year and undercut prices.

The surge in demand for corn to produce ethanol has sparked a debate on whether there are enough supplies of the grain to meet the needs of feeding livestock and poultry and if this could lead to higher food costs.

Corn prices have doubled to well over US$4 a bushel over the past year, hitting their highest levels in 10 years.

Page also stressed the need for "free, fair and open" global trade, adding that such a system would allow for any major adjustments such as of weather damage to crops as well as better trading scheme.