Grain-Market Expert Weighs in on State of the Union and Bush's Call for More Ethanol Use
MINNEAPOLIS - President Bush is expected to call for a mandatory increase in the use of ethanol in fuel in his State of the Union address tonight, which will have a dramatic effect on ethanol production and corn prices, as well as livestock markets and ultimately supermarket prices for many meats and grains.
24 January 2007
1 minute read
According to information released by the White House in advance of the president's address, Bush is expected to call for an increased supply of renewable and alternative fuels by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017, the primary source of which is corn-based ethanol. This new requirement is nearly five times the 2012 target now in law, and it is expected to displace 15 percent of the country's projected annual gasoline use.
As ethanol production increases, demand for corn -- and corn prices -- increases. Corn prices are currently at a 10-year high, and the price of a bushel of corn has jumped 60 percent since September. High corn prices might spell trouble for livestock farmers, who need grains to feed their cattle, swine and poultry. Eventually, high corn prices could lead to higher meat prices at the supermarket.
"Between ethanol production and everyday needs like feeding livestock, we're seeing huge demand on corn right now," said Mark Schultz, vice president of Northstar Commodity, which provides agricultural market analysis, trading and risk management services for growers, grain elevators, processors and investors around the world. "With a slightly lower corn production last year, there is very little margin for error in this year's growing season."
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