Ethanol Demand Driving Expansion of US Corn Crop; USDA Projects 31% of US Corn for Ethanol in 2016
16 February 2007
|Projected production and use of corn in the US. Click to enlarge. Source: USDA.|
Demand for ethanol will push US corn output to more than 14 billion bushels by 2016, 4.3 billion (30.7%) of which will be used to produce approximately 12 billion gallons of corn-based ethanol, according to the US Department of Agriculture. In 2006, US farmers produced 10.5 billion bushels of corn, 2.15 billion (20.5%) of which went toward ethanol.
In the Agricultural Projections to 2016, the USDA noted that the strong expansion of corn-based ethanol production affects virtually every aspect of the field crops sector, ranging from domestic demand and exports to prices and the allocation of acreage among crops.
The USDA expects overall plantings expand and a higher portion of the total planted to corn. Higher feed costs and the increased availability of distillers grains as a byproduct of ethanol production also affect the livestock sector.
Corn acreage rises sharply in the USDA projections, climbing to 90 million acres by 2010 from 78.6 million acres in 2006 as rapid expansion in ethanol production increases corn demand, prices, and producer returns. As growth in ethanol use stabilizes, the USDA sees annual increases in corn production from yield gains outpacing increases in corn use for ethanol, allowing corn stocks to grow modestly and corn prices to ease somewhat.
Corn-crop expansion will likely lead to fewer soybeans, according to the USDA. In 2006, US soybean farmers produced 3.188 billion bushels. USDA expects that to bottom out at 2.88 billion bushels in 2009.
On the biodiesel front, USDA expects production capacity and output to rise rapidly again in 2007/08. Slower growth is then projected for several years, with biodiesel output leveling off beyond 2010/11 as higher soybean oil prices reduce profitability. At a projected high of 700 million gallons, biodiesel uses about 23% percent of soybean oil production, but accounts for less than 2% of highway diesel fuel use in the United States.
And despite the projected growth in production, even by the end of the projection period, ethanol production (by volume) represents less than 8% of annual gasoline use in the United States. The forecast assumes that cellulosic-based production of renewable fuels will meet the minimum specified in the Energy Policy Act of 2005 of 250 million gallons in 2013 and subsequent years. That does not factor in President Bush’s new call for a more aggressive 35 billion gallon renewable fuel standard by 2017. (Earlier post.)
In testimony before the US Senate Committee on Agriculture, Nutrition and Forestry last week, Ag Secretary Mike Johanns stressed that while corn will have an on-going role in the ethanol industry, cellulosic ethanol is the key to meeting production goals.
We are providing $1.6 billion in new funding in our proposal for renewable energy research development and production targeted at cellulosic ethanol. I am confident in telling you, I think corn will always be a part of our ethanol industry. It’s got a tremendous footing in the market. It’s been around a long time, really successful in the last couple of years. But if we are to meet our goals, if we are to meet that goal that the President talked in his State of the Union of reducing gasoline consumption by 20 percent in ten years, we need to move towards cellulosic.
But here’s the positive thing about that. All of a sudden, ethanol goes from a corn-belt-based program to a national program. If you have biomass in your state, you have forest ground where literally you want to clean up what’s laying on the floor of that forest, you could have a biomass program.—Sec. Johanns
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