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Ethanol

Ethanol demand spikes U.S. corn prices

Friday, January 19, 2007 by: Jessica Fraser
Tags: ethanol, food supply, alternative fuels


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(NewsTarget) The U.S. Department of Agriculture (USDA) announced last week that the price of corn was at a 10-year high, after crop-damaging droughts left worldwide supplies short as ethanol fuel and livestock feed demands increased.

Corn prices have gone up 86 percent in the last year alone, leaving the world's supply of the grain at the lowest levels since 1978, the USDA said. Despite the third-largest U.S. crop in history, increased demand is projected to cause global supplies to fall by more than 50 percent.

However, the surge in corn prices may cause farmers to plant more corn in the future instead of wheat, soybeans or cotton, which would drive up prices for those crops as previous supplies fall short. March-delivery corn futures rose by 5.3 percent, while wheat rose 5 percent and soybeans rose 6.3 percent.

"We have to have a lot more acres planted to corn or the current prices will look cheap," said Dale Schultz, a commodity specialist at Nebraska-based feedlot Gottsch Enterprises.

Last year's U.S. crop was 2 percent below USDA forecasts, as American farmers planted an average of 3.9 fewer acres of corn and nationwide droughts damaged crops. Simultaneously, worldwide consumption of the grain for the year beginning Oct. 1, 2006, is predicted to exceed 725 million tons.

Rising corn prices have been largely spurred by record demand for the gasoline additive ethanol. Requests for corn-, wheat- and soybean-based ethanol could cause global corn use to rise by more than 1 billion bushels -- 47 percent -- in the coming year, according to USDA Chief Economist Keith Collins.

Increased demand and short supplies are projected to cause worldwide inventories of corn to fall below 87 million tons -- a 55 percent decrease since 2000, the USDA said.

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