Rushville Republican

Agriculture

December 13, 2013

Low corn prices spark potential for increased ethanol demand

(Continued)

Hurt said there are clear indications that exports will continue to grow, while imports have all but stopped.

“While it is still too early to make accurate predictions of trade volumes, net exports in the range of 400 million to 550 million gallons of ethanol might be likely,” he said. “If so, that could add 150 million to 200 million additional bushels of corn use for ethanol.

“These two markets would mean that corn usage could reach 4.95 to 5 billion bushels of corn usage from the 2013 crop — higher than USDA’s current estimate.”

Consumption of E85 is another area of potential growth for the corn ethanol sector. But a gallon of E85 - a blend of 85 percent ethanol and 15 percent gasoline — produces less mileage than higher gasoline blends. That means gasoline prices would have to be much higher or E85 prices much lower to spark demand growth.

“While ethanol and E85 are not sufficiently low-priced right now to make greater E85 use economic, low corn prices would be one of the conditions that could provide lower E85 prices later in the marketing year,” Hurt said. “For example, February ethanol futures are 60 cents lower than current cash prices.”

Greater corn use for ethanol could help growers who are hoping for some price recovery for the 2013 crop. According to Hurt, corn use for ethanol could exceed the USDA projections by about 100 million bushels.

While that alone wouldn’t be enough to bring corn prices back to $5 per bushel, corn exports also are currently pacing above USDA projections, which could lead to some price increases.

“These two support a growing usage base that is being stimulated by low corn prices and should help corn prices to establish a bottom before beginning a modest rally,” Hurt said.

The extent to which corn prices recover could also depend on likely upward revisions to the final 2013 corn crop size by USDA on Jan. 10.

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