November 15, 2006

 

USDA chief downplays effect of ethanol demand on corn

 

 

It looks like US farmers will be able to meet expected increases in corn demand from the booming ethanol industry, while also keeping up with food and livestock feed requirements, US Department of Agriculture Secretary Mike Johanns said Tuesday (Nov 14).

 

Any fear that that the Bush administration has plans to kick acreage out of its conservation programme to boost corn production are, for now, baseless, Johanns said.

 

Poultry industry leaders have voiced concerns that the feed they need will become more expensive if feed mills are forced into bidding wars with ethanol plants.

 

And this week, Ken Cook, president of the non profit consumer organisation Environmental Working Group, said he was very concerned the protected land in the government's Conservation Reserve Programme "is looking so attractive" with so much demand for corn.

 

There are 106 ethanol plants in operation, an additional 48 plants are under construction and seven undergoing expansion, according to the Renewable Fuels Association. Current ethanol output is 5 billion gallons, but that is expected to rise another 3.5 billion when unfinished plants go on line.

 

USDA Chief Economist Keith Collins told Congress in September: "The United States will need substantial increases in corn acreage to prevent exports from declining and livestock profitability from falling."

 

But if that land comes out of the government programme that pays farmers to keep fallow, Cook said, "We're looking at a lot more fertiliser use, a lot more herbicide use, a lot more run-off from farm fields, loss of wildlife habitat."

 

Johanns said Tuesday that there are 4 to 7 million acres idled in the Conservation Reserve Programme that are viable for corn production. But he also stressed that US corn production is at near-record levels and new technology will continue to boost yields.

 

"We have companies out there telling us that they are very, very close in their research to having more drought-resistant, more pest-resistant, more disease-resistant corn hybrids," Johanns said. "In fact one company even suggested that you could see yield improvement as high as 40 percent...," he said.

 

Rep. Collin Peterson, D-Minnesota, who is expected to take over as chairman of the House Agriculture Committee in January, agreed that corn yields will continue to improve, but also suggested that many farmers will likely switch soybean acres to corn.

 

Peterson told Dow Jones Newswires Monday that he doesn't expect the government to pull land out of the Conservation Reserve Programme. The marketplace will dictate what's planted, he said.

 

Johanns agreed. He said soybean production and ending stocks will be the largest ever this year "as farmers start thinking about next year and what their choices are going to be in terms of planting, there will be thousands of individual decisions made about corn, soybeans and other crops".

 

The USDA is now paying about US$2 billion annually to keep 36.8 million acres--much of which is considered environmentally sensitive--out of farm production.