September 14, 2007

Exports to pull US corn output from slow ethanol demand

As a slower start-up for new ethanol plants and declining use of capacity at existing facilities led lower estimates for the corn-sourced biofuel, strong export demand will minimise the impact, according to the World Agricultural Supply and Demand Estimates report released September 12.

Ken Hobbie, president and CEO of the US Grains Council said that while the booming ethanol industry has been significant to corn producers' profitability, a diverse customer base will still be essential to long-term success of US corn farmers.

Hobbie said the sluggish pace and weaker demand led the US Department of Agriculture on September 13 to sink estimates of corn-based ethanol by 100 million bushels for the 2007/08 marketing year and 25 million bushels lower for 2006/07. These reduced projections could be worrisome for US corn farmers if export markets are not expected to consume 20 million more bushels in 2006/07 and 100 million more in 2007/08. The US supplies nearly 70 percent of world's corn exports with the USDA predicting in March that corn exports would hover at 8 billion bushels.

The USDA predicts the 2007/08 corn crop currently being harvested will reach an all-time high of 13.3 billion bushels. In addition, projection exports of US sorghum and barley in 2007/08 were increased by 20 million bushels and 5 million bushels, respectively. US barley, corn and sorghum exports were the driving factors behind an increase of global exports of coarse grains to 112 million tonnes.

With the largest US corn crop coming in this year, USGC chairman Dale Artho said the harvest would definitely not just for US ethanol but for corn importers around the world who would need the grain for food and feed requirements.