AFBF Senior Economist Terry Francl said the USDA’s estimates (projected through 2016) seem to be a realistic indicator of what can be expected in the near future, but said AFBF expects more action in the renewable fuels arena.  A USDA report shows 86 million planted acres of corn in 2007/08 and 89 million acres in 2008/09 versus 86.5 and 91 million projected by AFBF. 

“The USDA projections appear to be realistic based on the conditions that exist in agriculture today and assumptions about the future,” said Francl. “Challenges lie ahead for many involved in agriculture, but crop producers who have struggled in past years may finally see more encouraging profits.”

AFBF predictions agree for the most part with USDA’s, but the numbers start to diverge in 2008/09 basically due to the underlying assumption about future ethanol production and the impact on the demand for corn.

The USDA is projecting 3.2 billion bushels of corn will be utilized for ethanol consumption in 2007/08 compared to 3.5 billion bushels for AFBF, which Francl says is not that great of difference in today’s fast changing world of ethanol. The differences in projections related to the production of ethanol equate to USDA’s 8.8 billion gallons of ethanol versus about 9.6 billion gallons, as AFBF predicts.

The greater difference occurs in 2008/09 when the USDA assumes corn used for ethanol would be 3.7 billion bushels producing about 10 billion gallons of ethanol versus the AFBF forecast calling for 4.9 billion bushels of corn to produce to produce almost 13.5 billion gallons of ethanol.

“Clearly it is an enormous challenge to try and come up with an estimate of the demand for corn to make ethanol,” said Francl. “It could be that the two estimates may approximate the parameters for ethanol use in 2008/09, with the actual number to depend on subsequent corn and crude oil prices in the intervening period. The other sensitive variable will be legislation that supports the biofuels industry 3-5 years in the future.”