March 6 (Bloomberg) -- Animal feed is projected to overtake fuel as the biggest use for corn because ethanol demand is slowing while farmers produce a record crop.
The BGOV Barometer shows the proportion of the harvest going to ethanol in the year ending Aug. 31, 2013, is forecast to fall to 35 percent of the corn crop from 40 percent this year, according to U.S. Department of Agriculture data. Animal feed will again be the largest use of the grain, after being overtaken by ethanol in 2011 and 2012, potentially quelling lawmaker demands to repeal federal biofuel subsidies that they blame for squeezing corn supplies and pushing up food costs.
“Ethanol growth should slow down, so if we get increased production, then this will lower the food-versus-fuel debate for awhile,” Bruce Babcock, an energy economist at Iowa State University in Ames, said in an e-mail.
Ethanol production has increased more than six-fold since 2002, boosted by federal renewable fuel standards and subsidies now being scrutinized by Congress. Critics including Senator Tom Coburn, an Oklahoma Republican, blame federal support of ethanol for increasing food prices, while supporters counter that federal subsidies reduce the price of gasoline for consumers. The rise in corn consumption for biofuels has been accompanied by higher prices for the grain.
A 45-cent-a-gallon tax credit given to ethanol blenders and a 54-cent-per-gallon tariff on imports of the fuel expired at the end of last year, while ethanol stockpiles are at record levels. Federal requirements for ethanol use are increasing at a slower pace and are set to peak at 15 billion gallons in 2015, according to the Renewable Fuels Association in Washington. Production in 2011 was 13.9 billion gallons.
That requirement may still pressure corn prices should production, and thus inventories, be less than expected, said Gary Blumenthal, chief executive officer of World Perspectives Inc., an agriculture consultant in Washington, in an e-mail. “The food-versus-fuel debate will always be present so long as ethanol has a policy mandate and corn ending stocks are relatively tight,” he said.
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