For the first time in US history, ethanol refiners are consuming more of the US corn crop than livestock producers and this trend is set to continue to at least 2014 as government mandates and exports boost fuel demand.
Corn use for ethanol has risen almost fourfold from 1.32 billion bushels in 2005 to 5.02 billion in 2011, exceeding 40% of the total harvest last year. Feed, which previously accounted for the biggest share of the crop, fell by almost 22% during the period to 4.79 billion bushels as livestock and poultry farmers in the US turned to alternative feeds, including dried distillers grain, an ethanol byproduct.
Feed demand is forecast to drop to 4.6 billion bushels, the lowest since 1990, after the U.S. cattle herd inventory on January 1st 2012 fell to the lowest number recorded since 1973. Chicken producers also curbed output due to poor profit margins from high corn costs.
Corn prices in the US have rose by 5.58% since December 2011. Despite this, US ethanol production is expected to reach record 13.7bn gallons this year, exceeding mandated levels by 1bn gallons. The meat industry and some environmentalists say rising corn consumption by ethanol refiners has driven up food prices worldwide. With high petrol prices, ethanol production remains a very attractive proposition.
This shift in the balance between food and fuel could be the tipping point in world grain markets. China, once able to supply its internal corn demand, currently expects to import a few million tonnes of corn next year from the US. This will likely place additional stress on the United States corn industry, as it will introduce another source of demand (and corresponding market pressures) for the US corn harvests.
Gerard Brickley, Director of Meat, Bord Bia – Irish Food Board
Source: Bord Bia – Corn Being Used More for Ethanol Production Than For Feeding in US