December 13, 2006

US farm policy should encourage domestic corn market, says a report

The US farm policy should encourage domestic rather than foreign markets for corn, said Institute for Agriculture and Trade Policy report.

The report adds to the USDA projections that ethanol demand might divert corn from export markets. There is a possibility of up to half of currently exported Midwest corn to be redirected to ethanol plants even if only a quarter of currently planned ethanol plants came online, according to IATP report.

The report, "Staying Home: How Ethanol will change US Corn Exports," by Mark Muller and Heather Schoonover's calls for US farm policy that supports domestic rather than foreign markets for corn.

Over the last few decades, US farm policy has driven over-production in a few commodities in order to increase exports, said Muller adding domestic uses could more effectively drive the commodity market.

He also pointed out to a lack of initiative taken by the government in considering proposed ethanol plants while identifying ethanol demand and corn exports. This often resulted in underestimation of ethanol's impact on corn markets, he said.

While production of ethanol from corn could double in the US by 2008, a continued reliance on corn to meet ethanol demand could prove dangerous.

Planting more corn might help meet short-term demand, but it also raised ecological concerns, said Schoonover.

He therefore stressed on the forthcoming Farm Bill to look beyond the near term and encourage the next generation of renewable energies and fuels, likely to come from cellulosic material in prairie grasses and other cutting edge technologies.