April 2, 2007

USDA: Ethanol to stimulate growth of grains sector

Corn, barley, sorghum and oats represent the largest grains sector the US field crops. These crops signify about one-third of area planted to principal crops and about one tenth of US agricultural export value.

Corn, in particular, has been the highlight of the ever-flourishing ethanol industry with its prices doubling this year, reaching US$4 per bushel as against US$2 in 2006. The surge in demand for corn have also fuelled dispute over the use of grain for fuel instead of food due to growing population and increasing wealth.

Moreover, the proposal of using other grains for ethanol has added more drama on the issue as this development augured to push prices of grains up which will have an adverse effect on the livestock sector thereafter.

But as of the moment, grains are expected to increase its yield as well as augment income for US feed grain sector farms. Average household income for feed operators in 2003 was US$69,034 or 17 percent higher than the average for all US households.

While the issue on ethanol and grains is being deliberated on US policy discussions, analysts foresee an uncertain outlook for the industry about its future and its impact on global agriculture and food sectors.

To view the full USDA report, please click here