Milling & Baking News - June 17, 2008 - 43

Export and Trade Issues

Only moderate slowdown seen for pace at
which use of grains for ethanol will grow
LONDON - Growth in global use of
grain in making ethanol in 2008-09
was forecast by the International
Grains Council to be only slightly
less than in the prior year. In its latest Grain Market Report, the I.G.C.
projected grain use in making ethanol soaring 30% over the previous
year, compared with the record gain
of 32% posted in 2007-08 over the
prior crop year, and climbs of 29% in
each of the two preceding seasons.
At the same time, the Council noted that the 32% expansion estimated
for the season just ended fell short of
the 50% growth predicted at the season's start.
"Due to high grain prices and
falling industry profits, some ethanol manufacturers have scaled back
expansion plans and reduced capacity utilizations," the Council explained. "Nonetheless, a substantial
further increase in the use of grain to
make ethanol is expected in 2008-09,
including the United States, European Union, Canada and China."
Crude oil values soar
In pointing to numerous factors
expected to slow growth in ethanol
capacity, such as tight credit, reduced government incentives and
narrower margins, the Council said,
"All these factors are being countered by soaring crude oil values
that are likely to support industry
profitability regardless of the level
of official incentives."
The I.G.C. forecast that 123.8 million tonnes of grain, including 117
million tonnes of corn will be used
to make ethanol in the 2008-09 mar-

keting year. That would set a new
record, comparing with the previous
high of 94.9 million in 2007-08, 71.8
million in 2006-07 and 55.8 million
in 2005-06. The forecast of grain use
for ethanol in 2008-09 represented a
threefold expansion from 43.1 million tonnes in 2004-05.
In accounting for 95% of
grain use, corn maintained its lead as the
primary
ingredient
for making ethanol.
Wheat was a distant
second in ethanol
making,
accounting for an expected
4.5 million tonnes in
2008-09, against 3.1
million in the prior year.
Wheat's share was less
than 4% of global grain use.
Ethanol for the first time became
the largest component of industrial
use in 2007-08 (15% of all wheat use),
surpassing grain use in starch manufacture, the I.G.C. said.
Another first for 2007-08 was U.S.
production of ethanol overtaking
Brazil to become the world's largest producer. The I.G.C. said that the
United States made 24.6 billion liters
in 2007, up 34% from the prior year
and representing nearly half of the
world output of 50 billion liters.
In noting the negative impact from
rising corn prices, the Council said,
"Recent increases in ethanol prices
and record crude oil are helping to
support industry profits."
As a result, the I.G.C. noted that
use of corn in making ethanol in the
United States was projected to rise to

100.4 million tonnes in 2008-09, up
32% from the prior crop year. That
accounts for almost all of the expected U.S. grain use to make ethanol
of 101.7 million tonnes in 2008-09,
against 76.8 million in 2007-08 and
54.5 million in 2006-07.
China, E.U. lag U.S.
China was a distant second in use
of grain to make ethanol, with its
projected total for 2008-09 at 12 million tonnes, against 11.5
million in the prior year.
Almost all of China's
grain use is corn.
Ethanol production in China in 2007
was 3.8 billion liters,
with
approximately
40% of the total destined for fuel and the
balance for pharmaceuticals and alcoholic
beverages. The I.G.C. noted
China's emphasis on expanding use of non-food ingredients, such
as cassava and sweet potato. Two
new ethanol plants using these crops
opened in the past year and already
accounted for slower growth in utilization of corn.
The European Union was projected to use 5.2 million tonnes of grain
to make ethanol in 2008-09, up 79%
from 2.9 million tonnes in 2007-08.
Production of sugar-based ethanol in Brazil expanded 12% in 2007,
to 19 billion liters.
"Continued strong investment in
the industry is expected to see production double over the next five to
six years," the I.G.C. said. It noted
that Brazil was aiming to expand
both domestic use and exports, with
the latter projected to absorb a third
of output. MBN

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Milling & Baking News - June 17, 2008

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