October 1, 2012

 

Japan urges US to limit corn use in ethanol

In order to avoid a supply shortage due to the worst drought in 56 years, six key corn user groups in Japan have urged the US to cut back on using corn to make ethanol.

 

In the first request of its kind, the Japanese groups, including Zen-Noh, the country's biggest agriculture cooperative, asked Washington to consider a two-year waiver of the so-called ethanol mandate to curb gains in US corn prices.

 

"This price rise has put great pressure on Japanese industries to seek alternative sources of corn and substitute feed grains," the groups said in a September 7 letter to US Agriculture Secretary Tom Vilsack.

 

"This can potentially lead to a long-term loss of export market share for US producers."

 

The groups have received no reply yet, said an industry source who declined to be identified without authorisation to speak to the media.

 

Higher US corn prices have prompted Japanese users to import non-US corn and cheaper feed wheat this year, resulting their imports of US origin falling to 8.31 million tonnes in the first eight months, down 15% from a year earlier.

 

The share of US origin corn in Japan's total corn imports fell to 83% in the January-August period from 95% a year earlier. The ethanol mandate, formally named the Renewable Fuels Standard (RFS), guarantees biofuels a share of the gasoline market.

 

The RFS serves to limit exports and other uses of corn by requiring that 13.2 billion gallons of corn based ethanol be produced in 2012 and 13.8 billion gallons in 2013, which are equivalent to 4.7 billion bushels and 4.9 billion bushels of corn, respectively, the letter said.

 

That would take up almost half of estimated production in the marketing year to August 2013 as the USDA on September 12 pegged US corn production in 2012-13 at 10.727 billion bushels.

 

"We believe it is in the US' national interest, as well as Japan's interest ... that the playing field of the corn trade be levelled by waiving the RFS for at least two years in order to insure adequate recovery of stocks and market access," the groups said in their letter.

 

In the US, the governors of two poultry-growing states in August asked the Obama administration for relief from the requirement to use corn ethanol in gasoline, saying the grain was needed to feed livestock used to feed people.