SINGAPORE (Dow Jones)--The United States will continue to supply enough corn to Asian buyers even as demand from the ethanol sector grows exponentially, a U.S. Grains Council official told Dow Jones Newswires.
"I think the concern among many Asian buyers (as to) whether the U.S will be able to keep exporting corn (to the region) is a valid one. But ethanol demand isn't going to cut off U.S. exports to the region in the future," said Adel Yusupov, international operations manager at U.S. Grains Council, a lobby group for U.S. grain growers.
Speaking on the sidelines of an industry gathering in Hanoi, Yusupov said such fears are caused by a lack of understanding of the U.S. corn industry.
While ethanol production is using up a lot of corn produced in the U.S., increasing adoption of genetically modified corn varieties and a general rise in yields are simultaneously increasing the output as well, Yusupov said. "This year, U.S. is expected to have the second-highest corn yield ever.
Yield gains in the past 25 years has been phenomenal," he said. U.S. corn yield have more than doubled to around 9.41 tons/hectare now from just 4 tons/hectare in 1980. The adoption of genetically-modified corn in the U.S. has been the primary driver of yield gains. Around 61% of the total corn produced in the now is genetically modified, compared with around 25% in 2001.
The U.S. Grains Council has said domestic corn yield will touch 10.15 tons/hectare by 2010. Moreover, ethanol production from corn leaves a byproduct named DDGS (distillers dried grains with solubles), which can be blended with feed and serve as an excellent corn substitute, thus freeing up more corn for exports, Yusupov said.
According to the U.S. Grains Council estimates, DDGS will displace more than 25 million tons of feed corn, starting in 2010. Several countries in Asia such as Japan, South Korea, Taiwan, Vietnam and Indonesia depend heavily on U.S corn for food and feed use.
U.S Farmers May Increase Corn Acreage
Yusupov said apart from increase in yield, U.S corn farmers may expand the current 33 million hectares under corn cultivation by around 6%-10% in the next 2-3 years. Various conservation programs currently underway have the potential to increase corn acreage, he said.
Besides, if corn farmers start making more money, there could be some diversion of wheat, soybean, barley and cotton-growing areas to corn cultivation, he said. According to participants at the conference, demand is rising in such a way that corn prices could well touch $3-$4/bushel over the next few years, from the current farmgate price of around $2-$2.10/bushel.
Yusupov said 2006 has been a good year for U.S. corn sales to Asia, as China's absence from the corn market and Argentina's lower corn supplies helped boost U.S' market share. "While overall corn demand in the world remained steady in 2006, U.S' market share in global corn trade rose to 70% in 2006 from 60% in 2005," he said.
The U.S. is now making inroads into nontraditional corn markets, such as Indonesia, Vietnam and China. While China has so far imported only 50,000 metric tons of corn from the U.S. this year, it may turn a potentially big market for U.S corn, Yusupov noted.
"If current rates of urbanization and corn processing continues, even if China has bumper corn crops for the next 3-4 years, it may not be self-sufficient in corn." U.S. corn exports to the Philippines, however, are being affected by a very high import duty of 50% imposed by the Philippine government, he said.
-By Prasenjit Bhattacharya, Dow Jones Newswires; 65 64154 085; prasenjit.bhattacharya@dowjones.com