USDA Crop Forecast and Ethanol Demand

Cindy Zimmerman

USDAThe latest crop production forecast out Friday from the U.S. Department of Agriculture slightly lowered the production estimate of the 2008 corn crop from 12.288 billion to 12.072 billion bushels, which would still be the second highest on record.

“We were expecting to see the numbers decrease a little, but we remain optimistic about this year’s crop,” said National Corn Growers Association President Ron Litterer of Greene, Iowa. “After such a bumper crop in 2007, we were faced with a number of challenges as the 2008 season began. Our nation’s corn growers have done a terrific job dealing with colder spring temperatures and Midwest flooding, and we salute them for their hard work.”

RFARenewable Fuels Association (RFA) President Bob Dinneen agrees that farmers are delivering an excellent crop despite unprecedented challenges. “All indications continue to point toward a remarkable harvest this fall and further evidence of American farmers’ capacity to continue feeding the world and helping to fuel this nation,” Dinneen said.

In the new World Supply and Demand forecast, feed and residual use for corn was lowered by 100 million bushels compared to the August report, to 5.1 billion bushels. Ending stocks were also be lowered, by 115 million bushels, to 1.018 billion bushels. However, the estimate for ethanol use of corn is unchanged at 4.1 billion bushels.

RFA believes that USDA may be overstating gross demand for corn for 2008/2009. According to RFA, Based on USDA’s calculations, American ethanol biorefineries will produce approximately 11.3 billion gallons of ethanol between September 1, 2008 and August 31, 2009 (the corn crop marketing year). Given current ethanol market dynamics and the requirements of the Renewable Fuels Standard (which calls for 10.5 billion gallons of starch-based “conventional” ethanol use in calendar year 2009), it is unlikely that ethanol production will reach the levels estimated by USDA in that time frame.

RFA also points out that the USDA estimate of gross usage of corn for ethanol does not take into account the fact that one third of every bushel processed returns to the feed market in the form of distillers grains.

corn, Ethanol, Government, News, RFA