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F E A T U R E
Ethanol
Reshapes the
2 EUS Corn MarketSI 4 EM Allen BakerULOV
30 Steven ZahniserSEVAW REBMA
Work is underway to add over 2 billion gallons tothe annual capacity of the U.S. ethanol sector.
To meet the sector's growing demand for corn,some U.S. corn is likely to be diverted fromexports.
In the future, corn may cease to be the mainfeedstock for U.S. ethanol production if cellu-losic biomass is successfully developed as analternative.
ECONOMIC RESEARCH SERVICE/USDA
Futures and options trading involve significant risk of loss and may not be suitable for everyone.Options, Cash & Futures markets are separate and distinct and do not necessarily respond in the same way to similar market stimulus.A movement in the cash market would not necessarily move in tandem with the related futures and options contract being offered.F E A T U R E
APRIL 2006
31AMBER WAVES
Grant Heilman, Grant Heilman Photography
WWW.ERS.USDA.GOV/AMBERWAVES
Futures and options trading involve significant risk of loss and may not be suitable for everyone.Options, Cash & Futures markets are separate and distinct and do not necessarily respond in the same way to similar market stimulus.A movement in the cash market would not necessarily move in tandem with the related futures and options contract being offered.F E A T U R E
The year 2005 was marked by a flurryof construction activity in the Nation'sethanol industry, as ground was brokenon dozens of new plants throughout theU.S. Corn Belt and plans were drawn foreven more facilities. As of February 2006,the annual capacity of the U.S. ethanol sec-tor stood at 4.4 billion gallons, and plants Eyewireunder construction or expansion are likelyto add another 2.1 billion gallons to thisnumber (map). If this trend and the exist- bushels more than it consumed in 2005. based materials used to produce ethanoling and anticipated policy incentives in That's a lot of corn, and how the market (see box, "That 70s Energy Scene").support of ethanol continue, U.S. ethanol adapts to this increased demand is likely2 production could reach 7 billion gallons in to be one of the major developments of Where Will the Corn E 2010, 3.3 billion more than the amount Come From?U the early 21st century in U.S. agriculture.S produced in 2005.SI The most recent USDA Baseline Large corn stocks will enable U.S.The tremendous expansion of the Projections suggest that much of the addi- ethanol production to increase initially4 ethanol sector raises a key question: tional corn needed for ethanol production without requiring much additional adjust-EM Where will ethanol producers get the corn will be diverted from exports. However, if ment in the corn market. The U.S. endedUL needed to increase their output? With aO the United States successfully develops the 2004/05 marketing year (MY-V corn-to-ethanol conversion rate of 2.7 gal- cellulosic biomass (wood fibers and crop September 2004-August 2005) with stockslons per bushel (a rate that many state-of-32 residue) as an economical alternative feed- of 2.1 billion bushels-enough to producethe-art facilities are already surpassing), stock for ethanol production, corn would 5.7 billion gallons of ethanol. As long asthe U.S. ethanol sector will need 2.6 bil-S become one of many crops and plant- corn is the primary feedstock for ethanolEV lion bushels per year by 2010-1.2 billion in the U.S., however, sustained increasesAW RE The U.S. ethanol sector is adding over 2 billion gallons to its capacityBMA Enlarged area
MinnesotaWisconsinSouthDakotaCorn acres bycounty, 2002< 9991,000 - 29,99930,000 - 74,999 NebraskaIowa75,000 - 139,999140,000 - 326,970 IllinoisEthanol plant capacity (millions gal/year)Current Expanded*1Capacity KansasMissourirange 310 340{* Includes new construction and expansions to current facilitiesSources: 2002 Census of Agriculture; Renewable Fuels Association and other industry sources.
ECONOMIC RESEARCH SERVICE/USDA
Futures and options trading involve significant risk of loss and may not be suitable for everyone.Options, Cash & Futures markets are separate and distinct and do not necessarily respond in the same way to similar market stimulus.A movement in the cash market would not necessarily move in tandem with the relat... [download for more]
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