Ethanol boom hits corn market

The rapid expansion in ethanol production will have far-reaching effects
throughout the agricultural sector.

As the ethanol industry absorbs a
larger share of the corn crop, higher prices will affect domestic use and
exports, providing for more intense demand competition between domestic
industries and foreign buyers of feed grains.

Higher prices affect corn’s
role as an animal feed. In the US typically 60-70% of the feed consists of
corn.

According to the USDA 2007 long-term projections, corn for animal
feeding is expected to decline to 40-50% of total use over the next decade, as a
result of higher prices.

Export under pressure
Increased use of
US corn for ethanol production and higher corn prices also will have important
implications for global trade and international markets.

The United
States typically accounts for 60-70% of world corn exports; however, higher corn
prices are projected to reduce this share to 55-60% over much of the next
decade—a result of reductions in foreign demand and increases in foreign
production.

ERS in Amber Waves gives a good analysis of the current and
possible future situation. To view the full article click here.