Higher Ethanol Blends: Impacts on Corn
Projected U.S. corn exports, acreage and production.
Daniel O'Brien
Published: Nov 12, 2010
In a full analysis of supply and demand outlooks under higher ethanol blends, Dan O'Brien, grain extension economist at Kansas State University, estimates that for each 1% increase of ethanol allowed in U.S. gasoline blends, 1.3 billion gallons more ethanol will be produced each year with requisite increases made in the U.S. Renewable Fuels Standard (RFS). This assumes that blenders would blend to the maximum amount.
Increases in U.S. ethanol production associated with higher gasoline blend proportions would also bring about increases in DDGS production. For each 1.3 billion gallons of addition ethanol produced, an additional 464.3 million bushels (mb) of corn is projected to be used to produce the ethanol, O'Brien explains.
As the ethanol industry has expanded over the past five years, many predicted exports as the losing end user. However, that has not held true as yields have increased and the usage of DDGS has helped counter some of the lost straight corn usage for livestock and exports of DDGS have surged.
O'Brien plugged in USDA's 10-year outlook on yields, acres and usage and if corn is reallocated away from traditional uses for ethanol use, the export market would drop. U.S. corn exports in his analysis are projected to decrease from a high of 2.25 billion bushels (bb) in MY 2012-13 to a low of 1.882 bb in MY 2015-16, and then to steadily increase to 2.126 bb in MY 2019-20.
If we had to decide between exports or the domestic feed industry, the presumption would be to maintain domestic livestock, O'Brien states.
The market will keep corn stocks around at least 1 billion bu. Factor one or two short crop years into the equation, though, and there seems to be an "invariably tightening of stocks, with the risk of a weather event bringing a weather-based shock to the system," he said.
Under the E-15 scenario, U.S. corn planted area would need to increase by an average of 10.18 million acres per marketing year (i.e., from an average of 89.34 ma to 99.52 ma annually). The increase will put pressure on other crops such as wheat, oats, sorghum and minor oilseeds to change to corn.
U.S. Corn Planted Acreage Under USDA Baseline & E-10, E-12 and E-15 Scenarios – U.S. Corn Acreage Adjusted for Projected Full Corn + DDGSce Usage
Read O'Brien's full analysis HERE. (link to full report)
Daniel O'Brien is an Extension Agricultural Economist with Kansas State University Research and Extenstion
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Tagged: ethanol, usda, Extension, wheat, sorghum
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