Hope for China's poor

Chicago: The United States could shift from the world's largest exporter of corn to a net importer as its burgeoning ethanol industry continues to expand, but in the meantime sales abroad are poised to rise as farmers boost acreage to cash in on decade-high prices.

"We will certainly have the opportunity to export at least as much in 07/08 as we appear to be doing in 06-07," said Robert Kohl-meyer, president emeritus of World Perspectives, a group of consultants and analysts based in Washington.

"Looking ahead, there's no doubt there's going to be a demand squeeze on world corn supplies."

The demand for corn-based ethanol could be so strong that the United States might one day become a net importer of corn, said Jose Rasco, investment strategist at Merrill Lynch.

"If the US becomes a net importer of corn, it could drastically affect the global corn industry," he said. "Our ability to export corn will probably be diminished by the increased demand domestically from the energy side."

Pondering

Most analysts do not foresee such a drastic shift. But calls by President George W. Bush to use 35 billion gallons of renewable fuels by 2017 have many pondering how the country will achieve such a goal.

Even Bush acknowledged last week that his plan for a five-fold increase in ethanol use will be constrained by the amount of corn that American farmers can grow.

Current law requires using 7.5 billion gallons of renewable fuels by 2012, with the majority expected to come from ethanol. US ethanol production was about 5 billion gallons in 2006.

Producing 35 billion gallons of ethanol solely from corn would consume the entire US corn crop at the level currently produced each year - about 11 billion bushels.

Several companies are working on using cellulosic material such as switch grass and corn husks to make ethanol, but there is no commercial production at the moment. While it is fairly easy to convert the starch in corn to sugar and then ferment ethanol, it is more complex and costly to break down the woody parts of plants and requires special enzymes.

US exports may decline in the coming years, but other countries are likely to export more corn if prices remain high.

Higher corn prices are likely to spur corn plantings in Brazil and make it a regular exporter. Brazil has exported corn at times, but it has also imported it from neighbouring Argentina.

Brazil exported about four million tonnes of corn last year, according to the US Agriculture Department. The United States exported an estimated 55 million tonnes.

Very competitive

"I think you might see Brazil step up as an exporter," said a US corn trader. "It looks like it's going to be a very competitive corn exporter this summer. But I'm not sure how much they can handle logistically with their roads and ports."

Argentina, currently the second largest corn exporter, is also expected to sell more corn abroad.

Even before Argentine farmers had finished planting, exporters had registered 10 million tonnes of new-crop corn for export, prompting the government to close export registries in November to ensure domestic supplies.

Argentina exported about 12 million tonnes of corn last year, USDA said.