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Ag and Trade Group Report Favors Domestic Markets for Corn

The next farm bill should encourage the redirection of corn from export to domestic markets, the Institute for Agriculture and Trade Policy says.

USDA projections have suggested that ethanol demand may divert corn from export markets, but a new Institute for Agriculture and Trade Policy report goes further, saying that up to half of currently exported Midwest corn could be redirected to ethanol plants even if only a quarter of currently planned ethanol plants come on-line.

As suggested by the title of IATP's Mark Muller and Heather Schoonover's report, "Staying Home: How Ethanol Will Change U.S. Corn Exports," the paper calls for U.S. farm policy that supports domestic rather than foreign markets for corn.

"Over the last few decades, U.S. farm policy has driven over-production in a few commodities in order to increase exports," says Muller. "We are entering a new era, where domestic uses are more important drivers of commodity markets."

Rather than committing money and resources to Mississippi River transportation infrastructure - as the Water Resource Development Act, a bill that Congress failed to pass this year, would have done - Muller says farm policy "should focus on building and diversifying opportunities for renewable fuels and energies; promoting farm practices and cropping systems that build soil health and improve water quality; and ensuring that farmers and rural communities benefit from these new opportunities."

According to the report, government projections dealing with ethanol demands and corn exports don't take proposed ethanol plants into account, resulting in likely underestimations of ethanol's impact on corn markets.

The report says production of ethanol from corn is likely to double in the U.S. by 2008 if the 150 proposed ethanol plants around the country are built. Schoonover says a continued reliance on corn to meet ethanol demands could be problematic.

"Simply growing more corn may help meet short-term demand, but it raises a number of ecological concerns," Schoonover says. "The forthcoming Farm Bill should look beyond the near term and encourage the next generation of renewable energies and fuels, which will likely come from cellulosic material in prairie grasses and other cutting edge technologies."

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