December 11, 2007

US corn prices to stay strong on ethanol

The US grain elevator industry has been assured that cash corn prices should remain strong for years to come, thanks to an ongoing and massive expansion of the domestic ethanol industry.

"The arithmetic indicates that corn price will need to remain in the plus-US$3.50 per bushel range," even if ethanol production margins weaken dramatically and plant expansion slows somewhat, as expected, said PRX Geographic Inc. President Marty Ruikka. "When ethanol hit US$3 a gallon, the oil industry was basically telling you your corn was worth US$7.50. Corn price has certainly a new plateau."

Ruikka, a nationally recognized expert in grain origination forecasting, served as leadoff speaker for the National Grain and Feed Association's 36th annual Country Elevator conference in Chicago. Ruikka told the standing-room-only audience that policy-makers and the man-on-the-street both appear fully committed to renewable fuels.

"We strongly believe in the future volatility of crude oil price" since most of the product is sourced from a politically, economically and socially unstable region of the world, Ruikka said in a long-term economic analysis distributed to those attending the speech. "We think the American public desperately wants to become independent of the Middle East."

With Congress approving new alternative energy legislation, President Bush openly calling for a 20 percent reduction in oil imports within 10 years, and the Supreme Court recently ruling that global warming is an "uncontested fact" that calls for immediate reductions in vehicle carbon dioxide emissions, Ruikka said the ethanol plant building boom of 2007 will undoubtedly continue.