Record corn crop refutes critics, ethanol industry says

By Susanne Retka Schill | August 12, 2013

While the USDA lowered its corn crop estimates in its monthly supply/demand report, the ethanol industry is pointing out that it is still a record crop and demonstrates the weaknesses in the arguments from opponents of the renewable fuel standard (RFS). The Renewable Fuels Association pointed out that the 13.76 billion bushel crop is up 28 percent from last year and 5 percent larger than the previous record crop. The USDA’s projected national average yield of 154.4 bushels per acre would be the third-highest yield on record.

“Following the worst drought in 50 years, USDA is projecting that U.S. farmers will produce a record 13.8 billion bushels of corn this year and the third best yield, which is further proof the RFS is working and Congress should not repeal or reduce it,” said Brian Jennings, executive vice president for the American Coalition for Ethanol.  “The RFS provides an economic incentive for scientists and farmers to innovate and sustainably deliver more corn, enabling the total U.S. corn supply to reach 14.5 billion bushels this year and making room in the market for adequate and affordable food, feed, and fuel.  Since the RFS was originally enacted in 2005, these advancements have driven U.S. farmers to produce around 20 bushels more corn per acre than before.”

“Opponents of ethanol claim high corn prices increase the price of groceries,” said Jennings.  “Using the critics’ own logic, we encourage the media to investigate whether falling corn prices, which have slumped to a three-year low in futures trading, will lead to lower food prices.  If not, Big Food and other opponents of ethanol have a lot of explaining to do,” Jennings said.

“While it is important to remember the crop is not yet in the bins, today’s report should be the last nail in the coffin of the ridiculous ‘food versus fuel’ argument,” RFA President and CEO Bob Dinneen concurred. “Corn stocks are likely to hit an 8-year high and prices are at a 3-year low. Meanwhile, USDA is projecting food inflation to average just 2 percent in 2013, down from 2.6 percent in 2012 and well below the historical average of 3 percent. Meat prices are expected to advance just 1.5 percent this year, compared to 3.4 percent last year—all this while ethanol production, demand, and consumption continues to increase. Clearly, the link between the RFS, ethanol, and food prices does not exist.”

Dinneen noted that USDA’s report suggests livestock and poultry feed will remain as the top use of corn, accounting for 53 percent of total demand (when animal feed co-products from ethanol production are factored into feed demand). By comparison, the ethanol industry is projected to account for 26 percent of corn demand on a net basis, exports will account for 10 percent, and food, seed and industrial use will make up 11 percent. Additionally, feed usage is projected to be 15 percent higher than last year.

USDA expects global grain production to hit 2.43 billion metric tons in 2013, up 8 percent from last year and a new record. “Not only is U.S. corn production expected to achieve a new record, but world grain output is projected to soar to a new record as well,” Dinneen said. “Simply put, there isn’t a grain of truth to the notion that U.S. ethanol or the RFS are having any kind of meaningful impact on American or world food prices.”