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Corn+Soybean Digest

New USDA Numbers Dispel Food And Fuel Debate; Supply Set to Outpace Demand

The National Corn Growers Association (NCGA) is encouraged by last week’s U.S. Department of Agriculture (USDA) crop production report illustrating that the U.S. will have enough corn to support the country’s food supply, ethanol and export uses.

For the marketing year ending in August 2008, the corn supply is projected to reach nearly 14.5 billion bushels, while demand is expected to hit 12.6 billion bushels. USDA estimates the 2007 corn crop will reach 13.2 billion bushels, the largest crop in U.S. history and 25% larger than the 2006 crop.

“The USDA World Agricultural Supply and Demand (WASDE) figures unmistakably dispel the food versus fuel debate,” says NCGA President Ron Litterer. “Clearly, the corn industry is poised to meet the demands for biofuels and will finish the marketing year with one of the highest levels of surplus in the last 20 years.

“U.S. corn growers will continue to be reliable suppliers of both food and fuel,” he adds. “Farmers respond to signals from the marketplace. If the market calls for more corn, that’s what farmers will grow.”

Litterer points out some common misperceptions about ethanol. “Ethanol production uses field corn – not sweet corn,” he says. “I continue to be amazed by media reports that suggest ethanol is driving up the cost of sweet corn in grocery stores. The majority of feed corn is fed to livestock, not humans. Roughly 10% of field corn is processed directly into human food, like corn flakes.”

Data from the Economic Research Service (ERS – part of USDA – found that the Consumer Price Index (CPI) for all food is forecast to increase 3.5-4.5% in 2007. ERS attributed this increase to retailers who pass on higher commodity and energy costs to consumers in the form of moderately higher retail prices. Moreover, the CPI for food increased 2.4% in 2006 and, over the past 10 years, has increased at an average annual rate of 2.5% (1997-2006).

USDA Chief Economist Keith Collins issued a statement Oct. 18 before the House Agriculture Committee, highlighting this year’s successes: “As we conclude 2007, the U.S. farm economy is coming off unprecedented increases in income and asset values the past few years. Prospects for expanding global food and fuel demand look bright. More normal weather and farm production increases worldwide should lead to improved supply-demand balance.”

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