US ethanol demand for corn 2008

There was an interesting speech, the other day by Joseph Glauber, the US Department of Agriculture’s cheif economist. The key passage for us is:

The U.S. corn market will continue to be dominated by ethanol production in the coming year. Ethanol corn use for 2008/09 is projected to increase 28 percent and account for 31 percent of total corn use as ethanol production capacity continues the unprecedented expansion begun in 2006.
Based on monthly production data from the Energy Information Administration, ethanol production capacity exceeds 7.3 billion gallons annually (figure 6). With plants under construction and expansion coming on line over the next 18-24 months total capacity will reach 13.4 billion gallons. The Energy Independence and Security Act of 2007 raises mandated levels of renewable fuel use to 9 billion gallons for 2008 and 10.5 billion gallons for 2009. This is sharply higher than the previous mandated level of 7.5 billion gallons in 2012. The current pace of plant construction and expansion indicates that annual ethanol production capacity will surpass 9 billion gallons before this summer and exceed 12 billion gallons early in the 2008/09 marketing year (figure 7). Corn prices, as currently forecast, support profitability for the sector, but plant utilization rates will be increasingly sensitive to prices for ethanol and co-products and heavily influenced by prices in the energy sector.
The relative tightness of the corn balance sheet in 2008/09, combined with increased risk premiums and growing investment in commodities, is expected to push farm prices higher again in 2008/09. The average price received by farmers is projected at a record $4.60 per bushel, up $0.60 from the mid-point of the 2007/08 forecast.

It don’t take a slide rule to work out that if the US is really going to take 57% of the corn crop by this time next year. It don’t take a degree in economics to forecast that level of demand will have a knock on effect across the whole economy in the US.

If you haven’t factored in a big increase in the price of corn, and you’re building a plant right now, you might want to sell it quick.

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2 Responses to US ethanol demand for corn 2008

  1. Pietro Di Zanno 4 March, 2008 at 8:46 pm #

    Why do you use the word “don’t”, when we should be using the word “doesn’t” or “does not”.

  2. Biofuelsimon 6 March, 2008 at 10:37 am #

    I deliberately misused the word don’t (and probably do quite frequently) to show that even the uneducated English-speaker — who might use don’t incorrectly in speech — could see that this was a bad idea.

    One of the most irritating uses of bad grammar that I have come across is the South London usage of the word innit. That is a contraction of isn’t it. Typically you can hear cool children say things like Rah, these chips is hot, innit?

    which would translate into standard English as

    Gosh, these fried potato chips are very hot.

    Isn’t it contract to int’it in the North of England.

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