USDA lowers corn crop projections, adding fuel to ethanol debate

Source: Amanda Peterka, E&E reporter • Posted: Thursday, September 13, 2012

The Agriculture Department today lowered its projections of this year’s corn crop, predicting average corn yields of 122.7 bushels an acre.

The monthly projection, while only slightly down from last month’s projection of 123.4 bushels, is a sharp decline from original record forecasts at the beginning of the growing season made before the drought caused crops to wither across the Midwest.

Overall corn production for the year is now projected at about 10.75 billion bushels, down from the 10.8 billion bushels predicted last month and the 14.79 billion bushels predicted in May. The new figure represents the smallest corn crop in six years.

Available corn supplies, however, are 108 million bushels higher this month because of larger expected beginning stocks. While USDA lowered its average expected price of corn 30 cents to between $7.20 and $8.60 a bushel, the price still remains a few dollars higher than at the beginning of the growing season.

The latest figures will likely keep the debate over ethanol’s contribution to high corn prices going strong.

Ethanol organizations this week continued their defense of the renewable fuel standard, which this year requires that oil refiners blend 13.2 billion gallons of ethanol into the nation’s fuel supply. They have blamed fuel costs for driving up the price of corn and have warned that changing the standard could have unintended consequences.

Biofuels and the RFS are responsible for heightened food security and why the country does not have a food scarcity issue even during the drought, two executives at biofuels companies also said yesterday.

Without ethanol, U.S. growers would not have grown the record amounts of corn they were projected to grow at the beginning of the season, said Dan Oh, CEO of the Renewable Energy Group Inc., a biodiesel company.

“If we hadn’t had this multiyear effort for biofuels,” Oh said, “we would not have had all this planting and production under way such that we might actually have a food scarcity issue instead of a price issue.”

Jeff Lautt, CEO of ethanol giant POET LLC, said taking ethanol out of the equation would not lead to a surplus of corn.

“I think the biggest misconception is that if this industry wasn’t there demanding corn that we wouldn’t have high prices, that we wouldn’t have volatility,” Lautt said. “Yes, we would have.

“If that demand [for ethanol] were not there, the farmers wouldn’t supply it,” he said. “It wouldn’t be surplus that we would be sitting on and you could sell cheap corn to livestock guys. There would be less corn growing.”

But the USDA report released today is likely to spur livestock producers who contend that the use of corn in ethanol is driving up the cost of livestock feed. The governors of eight states have asked that U.S. EPA provide at least a one-year waiver of the corn ethanol mandates in the renewable fuel standard.

“Put simply, ethanol policies have created significantly higher corn prices, tighter supplies and increased volatility,” Arkansas Gov. Mike Beebe (D) wrote in a letter to EPA Administrator Lisa Jackson last month.

EPA this week extended its 30-day comment period on the waiver by 15 days until Oct. 11, the date when the next crop projections will be released. According to the waiver process laid out by statute, the agency has a total 90 days to make a decision.

The National Corn Growers Association had requested a 30-day extension on the comment period, saying EPA would not have accurate enough information on the size of the corn crop by the original deadline. Fifteen percent of the corn crop has been harvested so far.

Growers “don’t know what this crop is. We know what it isn’t. We know it isn’t a bumper crop. But we don’t know what exactly it is. And we won’t know for at least another 30 days,” Jon Doggett, NCGA vice president of public policy, said yesterday. “Can we make an informed decision or can the administrator make an informed decision without knowing what exactly this crop will look like?”