Saturday, January 13, 2007

Three weeks from disaster

Reuters:Ethanol boom to evaporate corn surplus

The fuel ethanol industry's ravenous appetite for corn will leave the United States with only a meager three-week supply of the grain when this year's crop is ready for harvest, the U.S. government said on Friday.

Corn (maize) prices will surge to the highest level in a decade, an average $3.20 a bushel at the farm gate, the Agriculture Department predicted. Analysts said the dwindling stockpile makes it vital for farms to produce a huge crop this year.

Ethanol distillers are expected to use 2.15 billion bushels, or 20 percent, of the 2006 corn crop in making the renewable fuel. They could consume more than 3.1 billion bushels of the 2007 crop, an increase of nearly 50 percent.

In a monthly look at crop output and usage, USDA estimated 752 million bushels (19.1 million tonnes) of corn will be in grain bins in August, the smallest figure since 1996/97 and equal to a three-week supply.

"That's next to nothing," said private consultant John Schnittker. He cited estimates that corn plantings must increase by 10 percent to assure enough corn for ethanol makers, livestock feeders, exporters and foodmakers.

"Corn is driving the whole thing. It squeezes into acreage for wheat and soybeans," Schnitter said.

Don Roose, president of U.S. Commodities, a trading house, said larger plantings were needed. "Our margin of error has shrunk dramatically," he said.

America's farmers used to feed the world, now they feed our SUV's. I'm glad the farmers are making some money, but one crop monopolizing our farmland seems like a bad idea, kind of like putting all your eggs in one basket. Plus corn is hard on the soil. As farmers move to shorter rotations to maximize corn production per acre production declines, so you get diminishing returns leading to more acres being devoted to corn, etc.

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