Ethanol Eats More Corn Than Cows as Herds Drop: Chart of the Day

Ethanol refiners are consuming more of the U.S. corn crop than livestock producers and will remain the top users until at least 2014 as government mandates and exports boost fuel demand, according to North American Risk Management Services Inc.

The CHART OF THE DAY shows that corn use for ethanol rose almost fourfold from 1.323 billion bushels in 2005 to 5.021 billion, exceeding 40 percent of the total harvest last year. Feed, which previously accounted for the biggest share of the crop, fell 22 percent during the period to 4.792 billion as livestock and poultry farmers turned to alternative feed, including dried distillers grain, an ethanol byproduct.

Ethanol may consume as much as 5.1 billion bushels of corn in the year that began Sept. 1, or 41 percent of the crop, according to Jerry Gidel, a market analyst for Chicago-based North American Risk Management. Feed demand is forecast to drop to 4.6 billion bushels, the lowest since 1990, after the U.S. cattle herd on July 1 fell to the smallest for that date since at least 1973 and chicken producers curbed output because of poor profit margins from high corn costs, government data show.

“Demand for corn from ethanol producers will likely exceed feed consumption for at least another 24 months,” Gidel said. “While the growth in ethanol production will slow, it will take awhile before meat production expands.”

Chicken output fell 7 percent to 2.943 billion pounds in November, from 3.165 billion a year earlier, the U.S. Department of Agriculture said on Dec. 23. Wholesale boneless chicken- breast meat was $1.49 a pound on Jan. 6, below the prior five- year weekly average of $1.5141 and down from a record $2.625 in June 2004, USDA data show. U.S. chicken production has exceeded beef since 1996 and first topped pork in 1988.

“Until chicken producers can consistently make more than $1.65 for breast meat, they will be slow to increase production,” Gidel said. “It will take more than two years to get expansion rolling in the cattle industry.”

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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