The April World Agricultural Supply and Demand Estimates (WASDE) showed that corn supply and carry-out are expected to be larger than the market was expecting. “For the first time, this morning's WASDE report accurately indicated that corn processed by the ethanol industry produces both feed and fuel,” reported the Renewable Fuels Association (RFA). USDA relabeled the category previously called "ethanol for fuel" as "ethanol & byproducts," with a footnote explaining that corn used for ethanol also produces distillers grains, corn gluten feed, corn gluten meal and corn oil.
RFA reported that it “applauds USDA for revising its monthly corn supply-demand reports to better account for the fact that corn processed by ethanol facilities results in the production of both ethanol and animal feed.” RFA stresses that only the starch portion of the grain is made into ethanol. The corn’s protein, fat and fiber are marketed as animal feed. “Thus, on a net basis, only two-thirds of each bushel of corn processed by a biorefinery is converted to ethanol,” reported the RFA.
The USDA has historically reported only the gross usage of corn for ethanol, implying that the ethanol process uses the entire bushel of corn. “This has led to inflated claims that the ethanol industry is using nearly 40% of the 2010/11 corn supply,” reported the RFA, adding that when the production of animal feed co-products is taken into account, only 23% of the 2010/11 U.S. corn supply and 3% of the global grain supply are truly being used for fuel production.
only the gross usage of corn for ethanol, implying that the ethanol process uses the entire bushel of corn. “This has led to inflated claims that the ethanol industry is using nearly 40% of the 2010/11 corn supply,” reported the RFA, adding that when the production of animal feed co-products is taken into account, only 23% of the 2010/11 U.S. corn supply and 3% of the global grain supply is truly being used for fuel production.
The 39 mmt of animal feed produced by the U.S. ethanol industry this marketing year is about equal to the corn produced by both Mexico and Argentina—the world's fourth- and fifth-leading corn producers, the RFA added.
The 2010-11 U.S. corn carry-out remained at 675 million bushels. The trade expected carry-out to be lowered to 595 million bushels. Some analysts were expecting a drop to as low as 515 million bushels. Corn used to produce ethanol in 2010-11 was raised 50 million bushels to 5 billion bushels.
RFA continues to believe USDA is using an overly conservative ethanol yield assumption of 2.7 gallons/bushel, meaning USDA is anticipating ethanol production of 13.5 billion gallons in the 2010-11 marketing year. At the more commonly accepted industry average of 2.8 gallons/bushel, 4.82 billion bushels of corn would be needed to produce 13.5 billion gallons—nearly 200 million bushels less than USDA's estimate, the RFA reported. The reduction in corn use for feed results from the USDA expectation that feeders will increase their use of feed wheat as a substitute for corn.
Globally, the 2010-11 grain supply (coarse grains, wheat and rice) and carry-out were raised slightly from last month. Global corn carry-out is estimated at 122.43 mmt, down 0.5% from last month's estimate. Analysts were expecting the world corn carryover to fall to 121.03 million metric tons. The reason for the stronger-than-expected global stocks number is that global corn production was raised 1.2 million tons, with the biggest increases for Brazil, Uganda and Paraguay.