February 19, 2007

Ethanol demand driving U.S. corn crop expansion

Washington, D.C. – The U.S. Department of Agriculture (USDA) predicts that demand for ethanol fuel will push U.S. corn output to more than 14 billion bushels by 2016, with 4.3 billion bushels used to produce approximately 12 billion gallons of ethanol. In 2006, farmers produced 10.5 billion bushels of corn, with 2.15 billion used for ethanol.

In the government’s report, “Agricultural Projections to 2016”, the USDA says that the strong expansion of corn-based ethanol production will affect every aspect of the field crops sector, from domestic demand and exports, to prices and the allocation of acreage among crops. The report also says that as the growth in ethanol use stabilizes, annual increases in corn production will outpace the crop’s use for ethanol, allowing prices to ease somewhat. Despite the projected growth in production, the USDA says that ethanol production by volume represents less than eight per cent of annual gasoline use in the U.S.

The USDA also predicts that corn-crop expansion will likely lead to fewer soybeans; in 2006, U.S. soybean farmers produced 3.188 billion bushels, which the agency expects will bottom out at 2.88 billion bushels in 2009. The report says that soybean capacity and output will rise rapidly in 2007 and 2008, due to biodiesel production, but that biodiesel output will level off beyond 2010 and 2011 as higher soybean oil prices reduce profitability. At a projected high of 700 million gallons, biodiesel uses about 23 per cent of soybean oil production, but accounts for less than two per cent of highway diesel fuel use in the U.S.

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