Growth in global use of grain in making ethanol in 2008-09 was forecast by the International Grains Council (IGC) to be only slightly less than in the prior year. In its latest Grain Market Report, the IGC projected grain use in making ethanol soaring 30% over the previous year, compared with the record gain of 32% posted in 2007-08 over the prior crop year, and climbs of 29% in each of the two preceding seasons.
At the same time, the Council noted that the 32% expansion estimated for the season just ended fell short of the 50% growth predicted at the season’s start.
"Due to high grain prices and falling industry profits, some ethanol manufacturers have scaled back expansion plans and reduced capacity utilizations," the Council explained. "Nonetheless, a substantial further increase in the use of grain to make ethanol is expected in 2008-09, including the United States, European Union (E.U.), Canada and China."
In pointing to numerous factors expected to slow growth in ethanol capacity, such as tight credit, reduced government incentives and narrower margins, the Council said, "All these factors are being countered by soaring crude oil values that are likely to support industry profitability regardless of the level of official incentives."
The IGC forecast that 123.8 million tonnes of grain, including 117 million tonnes of corn (maize) will be used to make ethanol in the 2008-09 marketing year. That would set a new record, comparing with the previous high of 94.9 million in 2007-08, 71.8 million in 2006-07 and 55.8 million in 2005-06. The forecast of grain use for ethanol in 2008-09 represented a threefold expansion from 43.1 million tonnes in 2004-05.
In accounting for 95% of grain use, corn maintained its lead as the primary ingredient for making ethanol. Wheat was a distant second in ethanol making, accounting for an expected 4.5 million tonnes in 2008-09, against 3.1 million in the prior year. Wheat’s share was less than 4% of global grain use.
Other grains expected to be used globally in making ethanol in 2008-09 were sorghum, 1.4 million tonnes; barley, 700,000 tonnes; and rye, 200,000.
Industrial use of all grains in 2008-09 was projected to reach 251.5 million tonnes, up 15% from 281.2 million in the season just ended and compared with 187.1 million in 2006-07.
At the indicated level, industrial use will account for 15% of expected aggregate global usage of grain in the new season. Food use will account for 602 million tonnes and feed for 747.8 million, compared with 598.7 million and 750.4 million, respectively, in 2007-08.
Ethanol for the first time became the largest component of industrial use in 2007-08, surpassing grain use in starch manufacture, the IGC said.
Another first for 2007-08 was the U.S. overtaking Brazil to become the world’s largest ethanol producer. The IGC said the U.S. made 24.6 billion liters in 2007, up 34% from the prior year and representing nearly half of the world output of 50 billion liters.
In noting the negative impact from rising corn prices, the Council said, "Recent increases in ethanol prices and record crude oil are helping to support industry profits."
As a result, the IGC noted that use of corn in making ethanol in the U.S. was projected to rise to 100.4 million tonnes in 2008-09, up 32% from the prior crop year. That accounts for almost all of the expected U.S. grain use to make ethanol of 101.7 million tonnes in 2008-09, against 76.8 million in 2007-08 and 54.5 million in 2006-07.
China was a distant second in use of grain to make ethanol, with its projected total for 2008-09 at 12 million tonnes, against 11.5 million in the prior year. Almost all of China’s grain use is corn.
Ethanol production in China in 2007 was 3.8 billion liters, with approximately 40% of the total destined for fuel and the balance for pharmaceuticals and alcoholic beverages. The IGC noted China’s emphasis on expanding use of non-food ingredients, such as cassava and sweet potato. Two new ethanol plants using these crops opened in the past year and already accounted for slower growth in utilization of corn.
The E.U. was projected to use 5.2 million tonnes of grain to make ethanol in 2008-09, up 79% from 2.9 million tonnes in 2007-08. Ethanol production in the E.U. increased 11% in 2007 to 1.8 billion liters, contrasted with a 70% rise in the prior year. Most of the planned capacity increase will use corn and wheat, which will account for 1.5 million and 2.8 million tonnes, respectively, in the new year.
Production of sugar-based ethanol in Brazil expanded 12% in 2007, to 19 billion liters.
"Continued strong investment in the industry is expected to see production double over the next five to six years," the IGC said. It noted that Brazil was aiming to expand both domestic use and exports, with the latter projected to absorb one-third of output.