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USDA: Increased Ethanol Demand Will Support Corn Prices

posted on June 10, 2010


Soybean prices rallied Thursday after China increased its purchases of U.S. soybean oil. Typically, South America satisfies most of that demand, but a dispute with Argentina is prompting the Chinese to rely more heavily on U.S. supplies.

The outlook for producers of America's dominant agricultural commodity also improved this week, when USDA predicted strong demand from the ethanol industry would support corn prices despite production of what is expected to be a record crop.

USDA: Increased Ethanol Demand Will Support Corn Prices

Adequate stocks and increased use of coarse grains highlight this month's World Agriculture Supply and Demand Estimates report.

USDA projections for the 2010 corn crop remained at a record 13.4 billion bushels. Average yields are expected to remain high at 163.5 bushels per acre.

Most notable was the prediction more corn would be used to make ethanol. According to USDA, nearly one-third of the crop will go to production of the grain-based fuel additive. The amount projected to be used for fuel has been on the rise since January. Some analysts believe the bump-up is in response to rumors the Environmental Protection Agency will raise the ethanol-gasoline blend rate from 10 percent ethanol to 15 percent ethanol. .

Projections for the 2010 soybean crop held even with last month at 3.3 billion bushels. If realized, the harvest will be the second largest on record. USDA analysts estimate only a slight yield loss over last year with the average expected to hit 43 bushels per acre.

And U.S. wheat production was estimated slightly higher than last month at 2.1 billion bushels. The amount is down 100 million bushels from last year but ending stocks are believed to be more than adequate.

 


Tags: agriculture biofuels corn ethanol news renewable fuels rural USDA