US farmers embrace ethanol

Ethanol manufacturers are expected to use 3.6 billion bushels of corn, or
about 30% of the US corn crop during 2008/09. This is 7 percentage points up
from about 23% the prior marketing year.

A study by Informa Economics
forecast ethanol to climb to 34% of US corn production in 2009.

Nearly
80% of the 820 farmers surveyed at the American Farm Bureau Federation’s annual
meeting in San Antonio said ethanol was beneficial for agriculture, but 17% of
respondents said it did more harm than good.

The Farm Bureau is the
nation’s largest farm group, representing producers of cattle and hogs as well
as growers of cotton, wheat and corn.

Lower oil demand and the financial
problems in the ethanol sector might depress corn use for ethanol. The Reuters
poll found that still about 55% expected some of their corn crop to go toward
production of the renewable fuel this year.

Ethanol has been sharply
criticized by the food industry and aid groups for diverting corn away from
livestock and food makers, pushing world food prices up.

Higher feed
costs
Farmers were aware of the criticism, and 35% said ethanol’s biggest
impact was creating higher livestock and feed costs as well as higher food
prices.

Farm and biofuel groups, along with the US Department of
Agriculture, have deflected that criticism, saying factors other than ethanol
are primarily to blame, including volatile oil prices and increased global food
demand.

Slow growth
After years of rapid growth, ethanol has
begun to show its age. But the government’s so-called renewable fuels standard,
which requires the use of 11.1 billion gallons of renewable fuels in 2009,
should help growth during the next few years.

But some analysts and the
Renewable Fuels Association, which represents the industry, are forecasting
consolidation among ethanol firms due to tighter operating margins and less
demand because of a drop in gasoline use.

USDA has cut its projection for
corn used for ethanol by 400 million bushels in two months to reflect these
concerns.