World Grain - April 2007 - 42

BIOFUELS QUARTERLY: FOOD VERSUS FUEL DEBATE WAGES ON

A majority of the U.S.'s ethanol plants
are located in the largest corn-producing
states, which also have significant wheat
production. Wands said because of corn
prices, some wheat acres are going to be
lost to maize. Spring wheat acres are expected to decrease between 8% and 10%
this year and reductions in hard wheat
plantings are expected next year.

The seven largest ethanol producing
states (Iowa, Illinois, Nebraska, Minnesota, South Dakota, Wisconsin and Kansas) produce 8.3 billion bushels of corn
and use 1.7 billion for ethanol. They
produce 85% of the country's ethanol
and are expected to see an 82% increase
in corn demand for ethanol in 2008-09.
Wands noted that this is going to change

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the flow of grain in these states, which
traditionally have been grain exporters
but now could become importers.
"There's going to be huge demand
on truck freight going to these new facilities," Wands said. "We could have a
freight shortage when it comes to landbased haulers."
THE FUTURE DEBATE
This year, corn plantings in the U.S.
are expected to increase to 87 million
acres, with an anticipated crop of 12.3
billion bushels, Richman said. Fuel ethanol is expected to use 1 billion more
bushels this year.
However, the U.S. will barely be able
to grow its inventory. The stocks-to-use
ratio at the end of 2005-06 was equal to
17% of corn usage in the previous year.
This year, it's expected to be down to
9%. Yield improvements and the ability
to increase corn acres to 90 million will
help build inventories slowly.
By 2015, it's expected that 15 billion
gallons of ethanol will be produced from
corn. By that time, the gasoline market
is going to be 150 billion gallons.
"Even those promoting the use of
corn to produce ethanol don't think we
can get to where we're substituting U.S.
gasoline supplies through the use of
corn," Richman said.
The big question is how soon will cellulosic ethanol become commercially viable? Richman said the best-case scenario
is five years. It's likely the first facilities
will be added on to existing grain-based
ethanol and will use things such as stover
(the leaves and stalks left in the field after
maize is harvested).
"We're going to be having the food versus fuel debate over the next decade, because it's going to continue to be a cornbased industry," Richman said. "The risk
premium out there right now is going to
WG
continue to be significant."
Susan Reidy is editor of World Grain's sister
publication, Biofuels Business. She can be
reached by e-mail at sreidy@sosland.com.

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World Grain - April 2007

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