Record expansion in global grain use for ethanol

by Staff
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LONDON — Fired mainly by continued rapid growth in the United States, global use of grains in making ethanol in 2008-09 was projected by the International Grains Council to post an increase of 30.4% over the previous year. While the percentage increase lagged the prior crop year’s gain of 32.1%, the net increase of 29.4 million tonnes was a new record and ran well ahead of the increase of 23.4 million in the preceding season.

The I.G.C. projected global use of grain in making ethanol in the current season at 125.8 million tonnes, compared with 96.4 million in 2007-08 and 73 million in 2006-07. This season’s use was close to three times the 44.2 million tonnes used in making ethanol in 2004-05.

Based on I.G.C. projections of worldwide disappearance of grains in 2008-09, forecast at 1,746.9 million tonnes, ethanol use will account for 7.2%, against 5.7% in the prior season. Ethanol use represented just about half of forecast industrial use of grains in 2008-09, placed at 251.5 million tonnes, against 217.9 million in 2007-08.

Food use of all grains in 2008-09 was forecast by the I.G.C. at 605.7 million tonnes, against 600 million in the preceding crop season, while feed use was projected to reach 773.6 million, compared with 751.2 million in 2007-08.

Expanding use for making ethanol, mainly in the U.S., accounted for most of the gain anticipated in 2008-09. Of the expected global use of 125.8 million tonnes, the U.S. accounted for 101.6 million, mostly as corn. Thus, U.S. use of grains to make ethanol was forecast to rise 32.3% from 76.8 million in the prior season. That was up from 24.1 million in 2004-05.

Corn comprised the main grain processed into ethanol, at 93% of global use and 99% in the United States. Wheat was a distant second, with 4.7 million tonnes expected to be used in 2008-09 to make ethanol on a global basis, of which 3.1 million was in the European Union.

The I.G.C. said the U.S. leadership in expanding output of ethanol "was expected to slow from the recent very rapid rates, but with the utilization of maize likely to exceed 120 million tonnes within the next five years."

The Grain Council said the United States produced 24.5 billion liters of ethanol in 2007, and output in the first seven months of 2008 was 43% above the previous year. Industry annual capacity was currently estimated at 41.5 billion liters at 178 refineries. It said another 26 refineries were being built, and along with expansion projects at existing refineries, will raise capacity to 52 billion liters in the next few years. The I.G.C. pointed out that this was much closer to the 58 billion liters of "traditionally manufactured" ethanol mandated to be used in 2015 by the Energy Independence and Security Act of 2007.

E.U. use of grains for making ethanol in 2008-09 was projected at 5.6 million tonnes, against 2.9 million in the previous crop season. Canada was projected at 2.3 million, against 1.7 million, and China was expected to use 13.8 million in 2008-09, compared with 13 million in 2007-08. The Council observed that high raw material costs slowed expansion plans in both the E.U. and Canada. Completion of new plants could result in a production increase in 2008-09.

The I.G.C. also examined global use of grains in other industrial outlets. It estimated global use of grain to make starch at 91 million tonnes, up 4% from 87.5 million in 2007-08 and compared with 83.2 million in 2006-07.

For the first time in 2008-09, China will likely process more grains into starch than the United States, the I.G.C. said. The I.G.C. estimated that 25 million tonnes will be used in America to make starch, compared with 25.7 million in China. In 2007-08, the United States used 26.1 million tonnes and China 23.4 million.

The European Union was forecast to process 10.6 million tonnes into starch, against 10.8 million in the prior season. The European Union was the main user of wheat for starch, processing an expected 5.1 million tonnes of wheat as well as 5.5 million of corn.

Noting the downward trend in grain processing for starch in the United States, the Council attributed this to a downturn in production of high-fructose corn syrup due to consumer demand shifting to bottled water and low-calorie drinks.

Growth in China reflected a doubling in demand since 2004-05.

"Around half is for sweetener production, demand for which is soaring as a more affluent population turns to greater consumption of processed foods and deinks, especially in rapidly growing cities," the I.G.C. stated. "Rising economic prosperity is also lifting demand for other products that use starch, such as paper and textiles."

The I.G.C. projected grain used in brewing in 2008-09 at a global total of 33.6 million tonnes, against 32.9 million in 2007-08 and 31.7 million in 2006-07. Barley accounted for 27.2 million of the current year’s forecast, up from 26.9 million in the previous season.

The European Union accounted for 25% of world beer production, turning out 1.6 billion hectoliter, mainly using barley malt. The I.G.C. said that growing consumption of beer in eastern European countries, as well as in the Commonwealth of Independent States, mainly Russia, as well as in China and other developing countries in Far East Asia and Latin America are sustaining growing beer consumption.

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