The full House Agriculture Committee held a hearing today to hear from Secretary of Agriculture Tom Vilsack about the outlook for the farm economy, which is being supported by strong demand for ethanol and biodiesel.

Vilsack told the committee that the farm economy continues to remain strong with U.S. agricultural exports, farm cash receipts and net farm income projected at or above previous record levels. “With biofuel demand expected to continue growing, although at a slower pace in the future, a big challenge will be responding to that demand by developing new feedstocks, producing on more acres, and producing more per acre while protecting the environment,” he said. “I have the utmost confidence that our farmers and ranchers along with the assistance of USDA will be able to meet these challenges.”

In his written testimony, Vilsack expanded on the outlook for ethanol production as it relates to the farm economy. “U.S. ethanol production capacity is now estimated at 14 billion gallons. Production capacity is expected to increase modestly over the coming 18-24 months. New construction could add 560 million gallons of additional ethanol production capacity, bringing total capacity to about 14.6 billion gallons.”

Vilsack noted that returns for the biodiesel industry are expected to improve this year. “Fifteen percent of 2010/11 soybean oil production is expected to be used to produce about 380 million gallons of biodiesel. Soybean oil is the feedstock for about 50 percent of domestically produced biodiesel. The amount of soybean oil used in biodiesel production fell by 17 percent in 2009/10 to 1.7 billion pounds, but is expected to increase to 2.9 billion pounds in 2010/11.”