May 26, 2006

More US corn for ethanol than exports next year
 

More US corn would be converted into ethanol than exported out of the US in 2007, according to estimates by the Department of Agriculture.

This could likely mean that more corn is supplied to produce ethanol than world corn exports as the US already accounts for 70 percent of the world's corn trade.

Farmers are diverting more corn for ethanol production rather than feedstock for animals in view of the higher profits.

The Agriculture Department is forecasting that about 55 million tonnes of corn will be converted into ethanol, compared with exports of about 40-50 million tonnes.

The gap between exports and corn used for ethanol could widen further if oil prices continue to remain high, Keith Collins, chief US economist at the Agriculture Department said.

Ethanol plants would be requiring even greater volumes of corn in the next few years as US law requires ethanol production to increase to 7.5 billion gallons by 2012.

This would have required about 68 million tonnes of grain, meaning that corn production would have to increase significantly in order to meet demand from export and ethanol demand.

Low global corn stocks have worsened the situation at a time when ethanol production is sapping away corn supplies. Corn prices have risen by close to 20 percent over recent weeks.

Corn could go the way of sugar, which have doubled in price over the past year. Currently, 10 percent of world sugar output is used to produce ethanol, compared to 3 percent for corn.