USDA: Ethanol affects corn carryover estimate

USDA: Ethanol affects corn carryover estimate

Increasing ethanol production appears to be making a dent in the USDA’s corn carryover estimate for the 2006-07 marketing year, the head of the Nebraska Corn Board says.

The U.S. Agriculture Department said last week that corn production is forecast at 10.9 billion bushels. That’s down 209 million bushels from last year’s harvest.

Don Hutchens, Nebraska Corn Board executive director, said he thinks the rise of the ethanol industry led the USDA to drop its corn carryover estimate to 996 million bushels.

Carryover stocks were about 2 billion bushels last year.

”Ethanol production has consumed an additional 550 million bushels in the last year, so that accounts for about half of the decrease in carryover,” Hutchens said. ”There are dozens of ethanol plants under construction across the Corn Belt, and once they are operating, they will have to be fed each and every day.”

Nationally, there are 101 ethanol biorefineries that have a capacity to produce more than 4.8 billion gallons annually.

An additional 44 biorefineries are under construction and seven are expanding.

That will add more than 3 billion gallons of capacity when the projects are complete.

Nebraska has 12 ethanol plants in production with a capacity of producing more than 600 million gallons annually. Nebraska is projected to surpass Illinois as the nation’s second-leading ethanol producer next year as more state plants begin operations.

Nebraska ethanol plants use an estimated 250 million bushels of corn.

Hutchens said with around 10 additional ethanol plants scheduled to open in the next 18 months, the amount of corn used for state ethanol production could reach more than 500 million bushels.

The USDA estimated that the 2006-07 marketing year average price for corn raised 25 cents on both ends of the range, to $2.40 to $2.80 per bushel.

The increase reflects the tighter balance sheet, higher-than-expected cash prices in recent weeks and strong futures prices.

Strong export demand has been another factor, Hutchens said. He said corn exports have increased by 100 million bushels since the September supply-and-demand projections.

”I think our foreign customers have decided they better buy U.S. corn while it is available and while it is still cheap,” Hutchens said. ”I don’t think their consumption has changed much. It’s just that they have decided to fill their bins with cheaper corn.”

While ethanol and exports are gobbling up corn supplies, Hutchens said the livestock industry has expressed concern about tightening corn supplies.

”Fortunately, Nebraska’s cattle industry can take advantage of the growth in distillers grains, the co-product of ethanol production and an excellent feed ingredient,” said Hutchens. ”Nebraska is well-positioned to take advantage of the corn-ethanol-cattle combination.”

And the growing demand for corn could change the Nebraska landscape next spring, especially if corn prices continue to increase.

Hutchens said there could be a 5- to 7-percent increase in corn acres next year, to more than 8 million acres, especially if the trend for higher corn prices continue.

Information from: The Grand Island Independent,

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