Process Management

News 171 views last update:6 Aug 2012

Ethanol boom hits corn market

The corn market is being affected directly by the increase in ethanol production. Animal feed prices will be under pressure.

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.

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