World Grain - July 2007 - 18

COUNTRYFOCUS

Key Facts

United States
Maize-based ethanol boom having
enormous impact on agriculture, both
in the U.S. and abroad
by David McKee

Government subsidies to support purportedly strategic industries often have unforeseen consequences. Thus,
the intensifying food-for-fuel debate in the United States
(U.S.) should come as no big surprise. It is increasingly
argued by some observers that the ethanol mandates and
subsidies in the Energy Policy Act of 2005 have had the
unintended effect of tying the price of a bushel of maize
(corn) in the U.S. to that of a barrel of crude oil.
Since world maize prices largely depend on U.S. prices,
many believe the U.S. government-subsidized boom in ethanol is helping to drive up food prices, not just in the U.S.
but also in the poorest countries of the world. The 51¢-pergallon tax credit (14¢ per liter) on ethanol fuel was a key
part of a series of measures to further U.S. energy independence proposed by the
Canada
Bush Administration and
passed by Congress.
The 121 ethanol plants
operating in the U.S. will
consume 57 million tonnes
(2.2 billion bushels) of
maize in the 2006-07 crop
marketing year (Sept. 1
to Aug. 31) to produce
23 million tonnes (6 billion gallons) of ethanol.
Alaska
Hawaii
That will amount to 18%
of the maize crop, but just 4% of total U.S. fuel consumption. Expansion of existing plants plus the addition of 75
ethanol plants now under construction will raise America's
ethanol capacity to over 12.5 billion gallons, according to
the Renewable Fuels Association. The maize needed to fill
this capacity will be 110 million tonnes or about 40% of
current crop levels.
U.S. farmers have responded by planting 36 million ha
(90 million acres) of maize, up from 32 million ha (78 million
acres) in 2006. This was mostly at the expense of soybean
plantings, which declined 11% to 27 million ha. With maize
18

Capital: Washington, D.C.
Population: 301 million. Ethnic groups: white 81.7%, black
12.9%, Asian 4.2%, Amerindian and Alaska native 1%, native
Hawaiian and other Pacific islander 0.2% (2003 est.). Religions:
Protestant 52%, Roman Catholic 24%, Mormon 2%, Jewish
1%, Muslim 1%, other 10%, none 10% (2002 est.)
Location: North America, bordering both the North Atlantic Ocean and the North Pacific Ocean, between Canada and
Mexico
Government: Constitution-based federal republic; Chief of
state/Head of government: President George W. Bush (Jan.
20, 2001).
Economy: The U.S. has the largest and most technologically powerful economy in the world, with a per capita GDP of $44,000. In
this market-oriented economy, private individuals and business
firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the
private marketplace. U.S. business firms enjoy greater flexibility
than their counterparts in Western Europe and Japan in decisions
to expand capital plant, to lay off surplus workers, and to develop
new products. At the same time, they face higher barriers to enter
their rivals' home markets than foreign firms face entering U.S.
markets. U.S. firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace,
and military equipment; their advantage has narrowed since the
end of World War II. The onrush of technology largely explains
the gradual development of a "two-tier labor market" in which
those at the bottom lack the education and the professional/
technical skills of those at the top and, more and more, fail to
get comparable pay raises, health insurance coverage, and other
benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. The response to
the terrorist attacks of Sept. 11, 2001 showed the remarkable
resilience of the economy. The war in March-April 2003 between
a U.S.-led coalition and Iraq, and the subsequent occupation of
Iraq, required major shifts in national resources to the military.
The rise in GDP in 2004-06 was undergirded by substantial gains
in labor productivity. Hurricane Katrina caused extensive damage in the Gulf Coast region in August 2005, but had a small
impact on overall GDP growth for the year. Soaring oil prices in
2005 and 2006 threatened inflation and unemployment, yet the
economy continued to grow through year-end 2006. Imported
oil accounts for about two-thirds of U.S. consumption. Long-term
problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family
income in the lower economic groups. The merchandise trade
deficit reached a record $750 billion in 2006.
GDP per capita: $44,000 (PPP); Inflation 2.5%; unemployment 4.8%% (2006 est.)
Currency: U.S. dollar, $1 = €.73 (July 2, 2007 exchange rate)
Exports: $1.024 trillion f.o.b. (2006 est.); agricultural products
(soybeans, fruit, maize) 9.2%; industrial supplies (organic chemicals) 26.8%; capital goods (transistors, aircraft, motor vehicle
parts, computers, telecommunications equipment) 49.0%; consumer goods (automobiles, medicines) 15.0% (2003).
Imports: $1.869 trillion f.o.b. (2006 est.); agricultural products
4.9%; industrial supplies 32.9% (crude oil 8.2%); capital goods
(computers, telecommunications equipment, motor vehicle parts,
office machines, electric power machinery) 30.4%; consumer
goods (automobiles, clothing, medicines, furniture, toys) 31.8%
(2003).
Grain and oilseed crops: Maize, soybeans, wheat
Agriculture: 0.9% of GDP and 0.7% of the labor force.
Source: The World Factbook

July 2007 / World Grain / www.World-Grain.com

http://www.World-Grain.com

World Grain - July 2007

Table of Contents for the Digital Edition of World Grain - July 2007