Feb 18, 2012

CORN yields in the US have risen by about 50 per cent over the past three decades but is now struggling to meet demand.- Weekly Times Now


Peter Hemphill | February 16, 2012

CORN yields in the US have risen by about 50 per cent over the past three decades but is now struggling to meet demand.

With corn supplies the tightest they have been since the mid-1990s, prices have risen substantially and are holding at double normal levels.

Indeed, most market analysts agree corn prices have kept wheat prices buoyant, especially since there is a glut of the latter.

Tight US corn supplies have been driven largely by the ethanol industry muscling in on the meat industry.

As the US rolled out its renewable fuels program, production for the biofuel increased 10-fold during the past decade to more than 50 billion litres.

About 40 per cent of the US corn crop is now used for ethanol production.

Another 40 per cent goes directly into animal feed, while only a small proportion is used for food such as corn chips and tortillas.

The rest is converted into a range of other products such corn syrup and cooking oils.

While ethanol production has become the largest use of the corn crop, it has also developed a high protein byproduct - dried distillers grains with solubles - now highly prized around the world as an animal feed.

China is one of the biggest animal feed markets in the world and is steadily losing its self-sufficiency status.

The US Grains Council last week said Chinese imports of DDGS was forecast to rise to six million tonnes by 2016.

Prior to 2009, it did not import any, instead opting to rely on its own production.

As a rapidly expanding middle class in both China and India moves to buy more meat products, their feed sectors will struggle to keep up with domestic demand.

A 2006 Food and Agriculture Organisation report showed corn yields in developing countries were not keeping pace with those in the western world.

For example, Chinese corn yields were half that of American farmers, while many other developing countries had yields just one third of the US.

"In spite of the advances attributed to the Green Revolution and the introduction of high yield maize varieties the possibilities of maize yield improvements in many countries has remained large as the degree of production efficiency, especially in the developing countries, still falls below major commercial producers," the FAO report said.

Demand by the animal feed and ethanol markets - not only in the US, but around the world - are likely to drive the global corn market in the foreseeable future.

Whether farmers can keep producing enough corn remains to be seen.

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