US to plant enough corn in 2007 for 8.8 bil gal of ethanol

New York (Platts)--28Mar2007

US agriculture officials said Wednesday that US farmers will plant 87
million acres of corn in the farm year running from September 2007 to August
2008, 9 million acres more than last year and the highest corn acreage since
1945.

The US Department of Agriculture projects that 27% of the 2007-2008 corn
crop will go toward producing the alternative fuel ethanol, resulting in
production of about 8.8 billion gallons, USDA chief economist Keith Collins
said at a US Energy Information Administration conference on energy modeling.

In this crop year, September 2006 to August 2007, US ethanol production
is on track for about 5.9 billion gallons, representing about 20% of the total
corn crop, Collins added.

Collins was speaking ahead of the Friday release of a key USDA corn
report expected to impact ethanol margins going forward. The Prospective
Plantings report "is expected to be a major factor for corn prices (and
ethanol margins) over the near-to-intermediate term," said AG Edwards
analysts in a report Wednesday. Corn prices account for more than half of
ethanol producers' costs, they said.

A 10-million-acre increase "is largely reflected in current [corn]
prices," according to AG Edwards. A lower-than-expected 8-million-acre
increase or a higher-then-expected 12-million-acre increase could affect
prices by 50 cents/bushel either way, they said.

"Also worth noting, should a 12-million-acre increase occur and prices
decline, this may be bullish for 2008 corn prices and bearish for ethanol
longer term as it could encourage additional ethanol capacity additions to
proceed," said the analysts.

USDA's Collins noted ethanol production is expected to rise to 12 billion
gallons by 2016-2017, and use up about 30% of the US corn crop. He said the
forecast assumes corn prices in the mid-$3/bushel range and declining ethanol
profitability.

--Cathy Landry, cathy_landry@platts.com
--Beth Evans, beth_evans@platts.com