May 14, 2007

 

USDA: Ethanol corn demand in US to be stronger than expected

 

 

The US ethanol industry will use 3.4 billion bushels of corn produced this year for the 2007/08 marketing year, keeping the forecast for domestic corn ending stocks low but still up by 10 million bushels over the 2006/07 carryout, the US Department of Agriculture said Friday (May 11) in its monthly supply and demand report.

 

USDA, in its first World Agriculture Supply and Demand Estimates report to address the 2007/08 marketing year this year, predicted corn production this year will reach 12.46 billion bushels. That's an increase from last year's production of 10.535 billion bushels.

 

The US ethanol industry will use 3.4 billion bushels of corn in the 2007/08 marketing year, above an initial USDA forecast earlier this year that called for 3.2 billion bushels to go into ethanol production.

 

The US ethanol industry used 2.15 billion bushels of corn in the 2006/07 marketing year.

 

Ending stocks for the 2007/08 marketing year are forecast at 947 million bushels, up just 10 million bushels from the estimate of 937 million in 2006/07, a year that saw rising ethanol demand pull the carryout below the 1-billion-bushel mark.

 

USDA Chief Economist Keith Collins, in an interview last month, stressed the importance of corn stocks: "Stocks are what determine price. Your supplies above your use are really what dictate market prices and so as you run your stocks down, then there is increased competition for those stocks and then prices go up and prices end up rationing the demand to meet your available supplies."

 

The USDA, in the new monthly report released Friday, said: "Total US corn use in 2007/08 expands substantially despite lower feeding and exports as ethanol corn use is expected to rise 58 percent. For the first time, ethanol use is projected above exports at 3.4 billion bushels reflecting continued expansion in ethanol plant capacity and profitability for ethanol producers."

 

US corn exports are forecast to fall to 1.975 billion bushels in 2007/08, down from 2.2 billion in 2006-07, according to the report.

 

The project strong production and demand for corn will be good for prices paid to farmers, the USDA said. The new 2007-08 price range forecast for a bushel of corn is US$3.10 to US$3.70 and that's up from the US$3.00-to-US$3.20 range for the previous year.