Threat of Corn Shortage Looms as Demand Soars

From Reuters

U.S. ethanol manufacturers, food makers and livestock feeders are consuming so much corn that stockpiles could be depleted by 2008 unless plantings expand sharply, analysts said Friday.

In its first forecast of the fall harvest, the U.S. Department of Agriculture estimated the corn crop at 10.98 billion bushels, the third-largest ever.

Even as news of the expected bumper crop sent corn futures prices lower on the Chicago Board of Trade, some observers expressed concern about the next two years in response to new USDA data.

In the 2006-07 marketing year, which starts Sept. 1, importers and U.S. industry will consume 839 million bushels, or 7.6%, more corn than is being grown, the USDA said.


“There’s definitely need for more corn,” said analyst Mark McMinimy of Stanford Washington Research, especially with the ethanol industry growing “bigger and hungrier” each year.

Growers need to plant about 85 million acres of corn next year to ensure an adequate supply, analysts said. That would be the largest plantings in three decades or more.

If the USDA’s forecast of this year’s crop proves true, “that postpones the corn supply crisis to next year,” private consultant John Schnittker said.

But an additional 800 million to 900 million bushels of corn are needed in 2007 as a cushion against shortages, Schnittker said.


If current consumption trends continue, stockpiles would plummet 40% to 1.23 billion bushels by next fall. The USDA said 11.82 billion bushels of corn would be fed to livestock, used as a food ingredient or distilled into ethanol in the coming year.

Demand for ethanol is growing as soaring oil prices push motorists to use more of the “green” fuel that is produced from renewable resources such as corn, sugar and soybeans.

Corn is the chief feedstock for U.S. ethanol, which will account for 2.15 billion bushels, or 18%, of use.