Milling & Baking News - August 12, 2008 - 22

News Feature

higher, along with "the depreciation
of the dollar" and "global changes in
production and consumption of key
commodities." While the focus of the
study was food prices, not ethanol, the
researchers said, "The ethanol blender
credit (51c a gallon), tariff (54c a gallon) and Renewable Fuel Mandate are
factors causing increased corn price,
but quantitatively most of the increase
has been driven by higher oil prices."
Corn prices recede as crop improves
Corn futures prices rose to record
highs near $8 a bu, and above in some
deferred contracts, at the end of June,
but have since plunged more than $2 a

most recent ethanol production data,"
the U.S.D.A. said.
Although use of corn for ethanol
production in 2008-09 is expected to
increase sharply, next year's use of
corn for ethanol as a percentage of
corn production increases even more
dramatically because of a smaller 2008
corn crop. Based on the July U.S.D.A.
projection of an 11,715 million bu corn
crop in 2008, projected use for ethanol
would equal 34% of the crop, compared with 23% of the record large
13,074 million bus 2007 crop.
Total corn use in 2008-09, projected
at 12,495 million bus, is down 300 million bus from the current year. Use

C.B.O.T. corn and ethanol futures prices
$3.50

$8

$3.00

Corn
Ethanol

$6

$2.50

$5

$2.00

$4

$1.50

$3
Aug. Sept. Oct.
2007

Nov. Dec.

Jan. Feb. March April May June
2008

bu, or 33%, as the late-planted and partially flooded crop has shown strong
recovery so far this growing season.
Soybean prices hit record highs over
$16 a bu in the first week of July and
also have dropped significantly.
In its July World Agricultural Supply and Demand Estimates, the U.S.
Department of Agriculture projected
3,950 million bus of corn would be
used to produce ethanol in 2008-09
(September-August), up 34% from
2,950 million bus in the current year,
which was up 39% from 2,117 million
bus in 2006-07. But projected use of
corn for ethanol in 2008-09 already has
been trimmed 50 million bus from the
initial May projection of 4,000 million
bus. Use for the current year (2007-08)
initially was projected at 3,400 million bus in May 2007 but was cut four
times, with the latest 50-million-bu
reduction in July "based on reported
delays in plant startups and construction, as well as lower expected plant
capacity utilization as indicated by the
22 / August 12, 2008

Milling & Baking News

per gallon

per bu

$7

$1.00
July Aug.

next year is expected to exceed 2008
production (but not total supply of
13,328 million bus) with the only increase in use expected in the ethanol
sector as other use categories stay the
same or decline. Projected use of corn
for food and seed in 2008-09 was 1,345
million bus, unchanged from 2007-08,
exports 2,000 million bus, down 450
million, or 18%, and feed and residual
5,200 million bus, down 850 million,
or 14%.
U.S.D.A. supply and use projections will be revised in the Aug. 12
WASDE report with inclusion of data
from the first survey-based 2008 corn
production forecast. Several early estimates from private analysts predict
the U.S.D.A. production number will
be above 12 billion bus.
"It still will be the second-largest crop ever," Ms. Holmes of the
N.C.G.A. said.
Production still short of demand
Ethanol production in April, the

latest month for which data are available, was 708,120,000 gallons, down
3% from 730,422,000 gallons in March
but up 44% from April 2007, according
to the Energy Information Administration of the U.S. Department of Energy.
Demand in April was estimated
at 751,600,000 gallons, up 5% from
712,860,000 gallons in March and up
46% from a year ago, according to data
from the R.F.A.
Meanwhile, imports of ethanol have
risen despite the 54c-a-gallon duty.
Ethanol imports in April were about
50 million gallons, up 28 million gallons from April 2007 and up 45 million
gallons from March 2008, according to
the U.S. International Trade Commission. Of the April 2008 total, nearly a
third came from Brazil, which converts
more than half its sugar cane crop into
ethanol. Private forecasts put ethanol
shipments from Brazil to the United
States between 800 million and 1,000
million gallons in 2008 despite the 54c
duty, up from less than 200 million
gallons last year.
U.S. ethanol production in 2007 was
estimated at 6,485 million gallons, up
34% from 4,855 million gallons in 2006,
according to the E.I.A.
As of early July, the R.F.A. said 161
ethanol refineries with total production capacity of 9,357 million gallons
a year were operational. Using unofficial calculations, monthly capacity
would equal 780 million gallons as of
July compared with April production
of 708 million, which indicates the ethanol industry was running just over
90% of capacity.
Another 49 plants with capacity of
4,258 million gallons a year were under construction or expanding, the
R.F.A. said.
Pace of plants coming online slows
But the pace of new ethanol plant
startups has slowed as profit markets shrank or were negative and talk
of bankruptcies increased in recent
months.
One press report in June indicated
"at least 16" ethanol companies were
filing for bankruptcy and "at least two
to three times that number" would file
within a year. Ms. Holmes said she
had heard about bankruptcies but not
specific numbers.
"What I hear is that plants have
backed off from capacity, but facilities
with good risk management are hanging in there," Ms. Holmes said.
According to reports on DTN, an
bakingbusiness.com / world-grain.com
http://www.bakingbusiness.com http://www.world-grain.com
Milling & Baking News - August 12, 2008

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