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Planet Ark World Environment News Ethanol, Corn Users May Deplete US Supplies By 2008

Date: 14-Aug-06
Country: US
Author: Charles Abbott and Lisa Haarlander

In its first forecast of the fall harvest, the USDepartment of Agriculture estimated on Friday the corn crop at 10.976 billion bushels (278.8 million tonnes), the third-largest crop ever.

Corn usage now exceeds production by a small margin.

But in the 2006/07 marketing year, which opens Sept. 1, importers and US industry will consume 839 million bushels or 7 percent more corn than is being grown, according to USDA.

"There's definitely need for more corn," said analyst Mark McMinimy of Stanford Washington Research, especially with the ethanol industry growing "bigger and hungrier" each year.

Growers need to plant around 85 million acres (34.4 million hectares) of corn next year to assure an adequate supply, the analysts said. That would be the largest plantings in three decades or more.

If USDA's forecast of this year's crop proves true, "that postpones the corn supply crisis to next year (2007/08)," said private consultant John Schnittker. He said an additional 800 million-900 million bushels (21.6 million tonnes) of corn are needed in 2007 as a cushion against shortages.

As a result, stockpiles would plummet by 40 percent, to 1.232 billion bushels (31.3 million tonnes) by next fall. USDA said 11.815 billion bushels (245.5 million tonnes) of corn will be fed to livestock, used as a food ingredient or distilled into ethanol in the coming year.

Demand for ethanol is growing as soaring oil prices push consumers to use more of the "green" fuel that is produced from renewable resources like sugar, corn and soybeans.

Corn is the chief feedstock for US ethanol, which will account for 2.15 billion bushels, or 18 percent, of usage.

Schnittker said an additional 6 million or 7 million acres (2.6 million hectares) of corn were needed.

"It wouldn't surprise me next spring if corn acreage were up 5 percent," said McMinimy. Farmers planted 79.4 million acres (30.3 million hectares) this year.

"We still have plenty of corn," said Paul Bertels, director of biotechnology at the National Corn Growers Association. He said attractive market prices for corn will lure at least 81.5 million acres (33 million hectares) into corn next year.

Prices will zoom if corn crops fall short in coming years, said agricultural economist Daryll Ray of the University of Tennessee. He said Congress may hear requests "to develop a meaningful buffer stock program." USDA has not run a grain reserve program since 1996.

PRICES DROP ON BUMPER CROPS

Along with its corn forecast, USDA pegged the soybean crop at 2.928 billion bushels (79.7 million tonnes), wheat at 1.801 billion bushels (49 million tonnes) and cotton at 20.431 million bales weighing 480 lbs (218 kg) each. The soybean and cotton crops would be the third-largest on record.

The wheat crop will sell for an average US$4.20 a bushel, the highest farm-gate price since 1996/97, USDA said, mostly due to "tightening foreign competitor supplies."

Futures prices fell at the Chicago Board of Trade due to the forecasts of bumper crops. Corn for delivery in December sold for US$2.41-3/4 a bushel, down 14 cents, when trading closed.

November soybeans ended at US$5.68-1/4, down 6 cents a bushel due to favourable weather that might boost output and pressure from declining corn and wheat prices. September wheat was US$3.73-3/4 a bushel, down 12-3/4 cents.

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