U.S. corn-based ethanol production could potentially reach 31.5 billion gallons annually, or about 20% of projected U.S. fuel consumption, by 2015, said a report issued by the Center for Agricultural and Rural Development at Iowa State University.
According to models examined, this would be the case if the price of corn rises to $4.05 per bushel, which is eyed as the breakeven price for ethanol production under current ethanol tax policy, as well as prices for crude oil, natural gas and distillers grains. The report did not specify whether $4.05 level is a cash or Chicago Board of Trade futures price.
In order to fuel this ethanol production, the report said it would require the U.S. to plant 95.6 million acres of corn. This would mean production of about 15.6 million bushels of corn, compared to recent levels of about 11.0 billion bushels.
The researchers said most of the additional corn acres would come at the expense of reduced soybean acreage. Meanwhile U.S. corn exports and U.S. output of pork and poultry would all be need to be reduced in response to higher corn prices. Wheat would be used to help fill feed demand.
“This means that the adjustments required to free corn for the U.S. ethanol industry are felt all over the world,” the report said.
The model shows once U.S. ethanol production reaches about 22 billion gallons, the U.S. will no longer have a surplus of corn to export.
“This does not mean that current corn-importing countries will face a scarcity of corn,” the report said. “It does, however, mean that they will source their corn from countries such as Argentina.”
In addition, the report said the U.S. and China will consume less pork.
However the report also added that increased biodiesel production from soybean oil could limit the soybean area that will switch to corn.
“If this occurs, then corn prices will rise much quicker, leading to smaller corn-ethanol production than calculated,” the report said.
The models also showed a 20% increase in wheat price and a 3% reduction in wheat area. Due to strong projected growth in wheat demand for animal feed, the models show wheat exports declining by 16%.
As the U.S. becomes a corn importer, as the model suggests then the U.S. pork and poultry sectors will lose their international competitiveness.
“Exports of these products will fall rapidly, further reducing the size of these sectors,” the report said.
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