Ethanol to take 30 pct of U.S. corn crop in 2012: GAO
WASHINGTON (Reuters) - Almost a third of the U.S. corn crop will be used in five years to produce fuel ethanol, possibly raising animal feed costs for farmers and meat prices for consumers, a new government report warned on Monday.
Assuming U.S. ethanol production continues to expand to the Energy Department's projected 11.2 billion gallons by 2012, about 30 percent of the corn crop will be needed for the fuel supply, according to the Government Accountability Office.
"Using more corn for energy production will likely exert additional upward pressure on corn prices, potentially influencing livestock feed markets and meat prices," the GAO said in a report to Congress.
About 27 percent of this year's corn crop will be used to make ethanol, according to the Agriculture Department. Corn prices are projected to average between $3 and $3.40 a bushel, making up an estimated 74 percent of the cost of producing ethanol, the GAO said.
The extra corn to make ethanol in 2012 will come from planting more acres by putting pastureland and idle land into production, planting corn where other crops like wheat were previously grown, or using corn that would be exported or used as livestock feed, the GAO said.
However, the agency said there could be harm to the environment if land set aside for water conservation or wildlife habitat is used to grow more corn for ethanol.
The Bush administration and many lawmakers in Congress are pushing for a huge increase in ethanol production over the next decade.
But instead of relying on corn, they hope scientific breakthroughs will occur to make ethanol for less money from agricultural and forest waste like corn stalks, switch grass and wood chips.
Separately, the GAO said the push to expand E85 fuel, which is made from 85 percent ethanol and 15 percent gasoline, could make the demand for corn worse as ethanol is not a gallon-for-gallon replacement for gasoline.
Ethanol contains only about two-thirds the energy of gasoline, requiring more E85 fuel for a car to travel the same distance it would on a gallon of traditional gasoline.
"While ethanol combusts more efficiently than gasoline, drivers nonetheless experience about a 25 percent reduction in miles per gallon in vehicles using high blends such as E85," the GAO said.
E85 is currently sold at about 1,100 fueling stations mainly in the Midwest, where it is mainly produced, out of 180,000 stations nationwide.