Tight world supplies of sugar are contributing to the demand for corn in Wednesday's USDA in two ways, by increasing exports of U.S. ethanol into markets usually served by Brazil, and by increasing the demand for high fructose corn syrup, analysts told Agriculture.com Wednesday.
Chad Hart, an agricultural economist at Iowa State University who tracks markets agrees.
In the February World Agricultural Supply and Demand Estimate report USDA increased its projected use of corn for ethanol from the January estimate by another 50 million bushels, to 4.95 billion bushels.
And it increased its projection of food use by 20 million bushels, with 15 million of that due to higher exports of high fructose corn syrup to Mexico, where it’s replacing sugar in soft drinks.
The Renewable Fuels Association said Wednesday that projected ethanol production may be too high.
Both Hart and Gidel think that the USDA projection is accurate, for now at least. Although ethanol plant margins have recently fallen to break even or even slight losses, based on futures prices of ethanol and corn, the industry has purchased cheaper corn on contract and remains profitable.
But Hart expects tougher times if prices continue to rise.
