Washington (Platts)--11May2007

Demand will keep up with the growing supply of ethanol in the US through
2008, but the future of biofuels after that will depend on improved 
distribution infrastructure and technology breakthroughs with cellulosic
ethanol, Secretary of Agriculture Mike Johanns said Friday.

     "It doesn't look likely that you would have an oversupply of ethanol," in
the next two years, said Johanns, who briefed reporters on the Bush
administration's farm bill proposal. "It sure looks like a solid year ahead
this year and next year."

     President George W. Bush has set a goal of using 35 billion gallons of
alternative fuels per year by 2017. 

     The administration's proposed agriculture legislation would invest $1.6
billion over 10 years in energy, most of which would go to cellulosic ethanol.
Johanns said that further big investment in corn ethanol and biodiesel is not
necessary because those markets are thriving. 

     The proposal would devote $500 million to bio-energy and bio-based
product research; another $500 million to renewable energy systems grants; and
authorize $2.1 billion in loan guarantees, primarily for cellulosic ethanol
plants.

     The House Agriculture Committee plans to draft its version of the
agriculture bill by the end of this month. The Senate appears to be on a
slower schedule.

     Johanns said the bill could fund projects that lead to breakthroughs in
cellulosic ethanol technology, but government investment alone will not
correct distribution problems, technology limitations, and other issues that
would cloud government efforts to expand expand alternative fuels enough to
meet the president's goal.

     "I don't think anybody is arguing that we should use the federal treasury
to solve all the problems," Johanns said.

     The Department of Agriculture's chief economist, Keith Collins, said that
problems with ethanol distribution might crop up in the next two years. "You
could have some pockets of oversupply only because the transportation system
will be pressured to distribute all that ethanol around the country," Collins
said.