Study: Ethanol production might soon stall

WEST LAFAYETTE, Ind., July 1 (UPI) -- A Purdue economist says U.S. corn demand is exceeding supply and, combined with Midwestern flood losses, ethanol production might soon stall.

Purdue University agricultural economist Chris Hurt says with higher corn prices, fewer ethanol producers can afford the feedstock. In turn, domestic livestock producers and foreign buyers are finding it more difficult to obtain grain.

"Everybody is trying to evaluate how many bushels of corn we've lost because of weather-related damage, what the implications are for prices and who can pay these high prices," said Hurt.

Using a similar 1993 Midwest flood as a model, Hurt estimates 2008 U.S. corn production could drop below 11 billion bushels. The ethanol industry needs 4 billion bushels of corn this year, while livestock producers used 6.15 billion bushels and foreign buyers 2.45 billion bushels of U.S. corn last year.

With millions of acres damaged by flooding, farm losses might reach into the hundreds of millions of dollars, Hurt said, noting growers have the most invested in this year's corn crop of any crop they've ever raised.

"So if they are losing that crop, it is going to be the biggest dollar loss that we have ever experienced on a per-acre basis."