November 3, 2010

USDA predicts 4.7 billion bushels corn to be used for fuel

USDA projects corn use for ethanol from the 2010-11 corn crop at 4.7 billion bushels - 37% of the projected total harvest-which will result in higher food prices.

Corn used for ethanol production plays a major role in corn prices. Corn farmers have said in recent years they can meet demand for their commodity by having higher yields.

The livestock industry is going to hurt with higher corn prices, but in the long run, there is a need to develop bio fuels and other energy sources that compete less directly with food production.

Last year's corn crop set records, and it appears that 2010 yields will top those in 2009. But even when the USDA was predicting a harvest exceeding 13 billion bushels, corn prices were inching upward. As we all know by now, USDA, in its October Crop Production report, reduced its corn-yield estimate by 6.7 bushels per acre and its projection for the US corn crop by 496 million bushels to 12.7 billion. Corn prices, meanwhile, were up 34.7%, with the Omaha cash price listed at US$5.12 per bushel this week.

The estimate, the report notes, was unchanged from the previous month even though ethanol production during July - the latest numbers available - set a record at 1.12 million gallons. This means higher food prices in the near future. With 37% of the corn you see in the fields here in Ohio going to your fuel tank, that is less going to feed animals, which in turn feeds you.