Corn down as ethanol doubts shadow US Farm Bill

16 May 2008 20:52  [Source: ICIS news]

HOUSTON (ICIS news)--US corn futures prices were down sharply on Friday as better planting weather and new doubts about the long-term political support for ethanol overshadowed passage by Congress of what was seen as a benign Farm Bill.

The Senate Energy Committee announced on Thursday it has instructed the US Department of Agriculture (USDA) and the Department of Energy to report by 30 May on the role of energy costs on food prices, Chicago's CME  exchange noted in a market commentary.

"This may raise renewed concerns about whether Congress will continue the longer-term national mandates for ethanol production and blending," CME said.

Bank of America (BoA) analysts said Thursday's passage of the $290bn (€189bn) Farm Bill would not create waves, citing a private briefing by agricultural consultancy Doane Advisory Services.

"The current bill should have little overall impact on crop planting patterns or overall economics for key row crops," the analysts said in a report.

The Farm Bill's proposed cut in ethanol subsidies to 46 cents/gal from 51 cents/gal would also have little effect on ethanol production or corn prices, BoA quoted Doane's senior economist Martyn Foreman as saying.

President George W. Bush has threatened to veto the Farm Bill, citing excessive spending. But there was enough support in Congress to over-ride the veto if necessary, the BoA report said.

Front-month CME corn futures were down by 8 cents/bushel at 591 cents/bushel around 18:15 GMT, and were now down by 8% from a peak of around 640 cents/bushel last week.

The decline has reflected an improving weather picture for the rain-delayed planting of the corn crop, which has also held back application of key fertilizer ammonia.

($1 = €0.65)

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By: Stephen Burns
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