Ethanol To Drive Long-Term Expansion Of US Corn Crop

US - Ethanol will be the driving force behind years of rapid expansion in the U.S. corn crop, pushing production up to 12.065 billion bushels for the 2007-08 marketing year, with steady increases predicted over the next 10 years, the U.S. Department of Agriculture said Wednesday.
calendar icon 15 February 2007
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The U.S. will see the strongest growth in U.S. corn and corn-based ethanol production over the next four years, but output will continue to increase steadily until 2016, the USDA said in its annual long-term "baseline" report.

The U.S. corn crop is expected to top 14 billion bushels in 2016, 4.3 billion of which will be used to produce more than 12 billion gallons of ethanol.

Farmers produced 10.5 billion bushels of corn in 2006 and 2.15 billion bushels of that was used by the ethanol industry, according to the USDA's February supply and demand report released earlier this month.

If the ethanol industry is to get the corn it needs for the rapid expansion it's undergoing, farmers will have to plant more, USDA Chief Economist Keith Collins said earlier this year.

There are now 113 ethanol plants in the U.S. with the capacity to produce more than 5.5 billion gallons annually, according to the Renewable Fuels Association, an industry group. Another 78 plants are being built and seven existing plants are undergoing expansion. The new plants and the seven expansions "will add more than 6.2 billion gallons of capacity when complete," according to the RFA.

Meanwhile, feed mills will be using less corn to produce food for livestock because ethanol demand is expected to continue to drive up crop prices. The average price paid to farmers for corn for the 2006-07 marketing year is $3.00 to $3.40 per bushel, according to the USDA's February supply and demand report. That is forecast to rise to an average of $3.50 for corn planted in the 2007-08 marketing year and up to $3.60 the following year, the baseline report said.

The average 2005-06 farm price for corn was $2.00 per bushel.

Corn exports are also expected to decline over the coming years. The U.S. is forecast to export 2.25 billion bushels of the corn produced in 2006 for the 2006-07 marketing year, but that drops to 1.925 billion bushels for the 2007-08 marketing year despite expectations for a substantial increase in production. The export forecast for 2008-09 drops even further to 1.85 billion bushels.

Soybean Output To Fall On Switch To Corn

While farmers continue to plant more and more corn in order to meet rising ethanol demand, fewer acres will be sown with soybeans, the USDA said in the 10-year forecast.

The U.S. produced about 3.188 billion bushels of soybeans last year, but that will drop to just 2.9 billion bushels for the 2007-08 marketing year, according to the report. Soybean production won't halt its decline until 2009 when output is predicted at 2.88 billion bushels. By 2016, the USDA expects production to get back up to 3.085 billion bushels.

Ethanol Boom To Depress Land Idling Program

Total farmland acreage enrolled in the government's Conservation Reserve Program -- a program that pays farmers to idle land considered to be environmentally sensitive -- is expected to drop to just 32.2 million acres in 2009, the USDA said Wednesday in the report.

Acreage enrollment, USDA said, will be 37.1 million acres this year, but that will decline over the next few years "as high prices encourage the return of some land to production when ... contracts expire."

USDA Secretary Mike Johanns told reporters last week he may decide to allow farmers an early release from a land-idling program in order to plant more corn.

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