WASHINGTON (Reuters) - The resurgent U.S. ethanol industry will use an additional 250 million bushels of corn through the next 15 months, dramatically reducing the corn surplus despite record crops, said the government on Thursday.
Traders said the forecast of higher demand would boost corn prices. They had expected modest reductions in the corn stockpile instead of the Agriculture Department’s large cuts.
“The big news was all about the demand on the corn,” said Don Roose of U.S. Commodities in West Des Moines, Iowa.
USDA lowered its forecast of corn on hand at the end of this marketing year by 7 percent, to 1.603 billion bushels, and on hand at the end of 2010/11 marketing year by 13 percent, to 1.573 billion bushels. Traders expected 1.714 billion bushels at the end of 2009/10 and 1.806 billion bushels for 2010/11.
In a monthly update of crop output and usage, USDA also forecast China would import 1 million tonnes of corn this year, up from its May estimate of 300,000 tonnes, and a nominal 100,000 tonnes in 2010/11. USDA did not change its forecast of U.S. corn exports for this marketing year or 2010/11.
Ethanol is the prominent factor for larger U.S. corn consumption and smaller ending stocks, said USDA. It said 9.25 billion bushels of corn will be used to make ethanol during this marketing year and in 2010/11, 3 percent more than its previous estimate. USDA said corn sweetener and starch production would rise too this marketing year.
“Corn use for ethanol is raised 150 million bushels reflecting the continued record pace of ethanol production and usage through March,” said USDA, raising its corn-for-ethanol forecast for 2009/10 to 4.55 billion bushels.
It raised its 2010/11 forecast by 100 million bushels, to 4.7 billion bushels, or 36 percent of a projected record 13.37 billion-bushel crop.
Jack Scoville, an analyst at The Price Futures Group, said corn supplies will be adequate despite higher use.
“It does mean that we are getting to the point where we’re going to have to make sure we have the production,” said Scoville. “At minimum, it should stabilize things.”
Ethanol trade groups await a ruling from the Environmental Protection Agency on a request to increase the ethanol-to-gasoline blend rate, now 10 percent, to 15 percent.
In the interim, said the Renewable Fuels Association, “we are seeking an immediate solution to current oversupply issues with the use of E12,” meaning a 12 percent blend of ethanol.
With harvest under way, the Agriculture Department forecast a winter wheat crop of 1.48 billion bushels, up 2 percent from its May estimate due to higher yields for hard red winter wheat and above trade estimates of 1.439 billion bushels.
Reporting by Charles Abbott; Editing by John Picinich