news/updates
Corn Rises After Senate Votes to Increase Mandated Ethanol Use
By Jeff Wilson
December 17, 2007
Dec. 14 (Bloomberg) -- Corn rose to a nine-month high, erasing earlier losses, after the U.S. Senate approved legislation that would more than quadruple the use of biofuels made from crops during the next 15 years.
The bill would boost use of alternative fuels such as ethanol from 7.5 billion gallons this year to 36 billion in 2022. President George W. Bush will sign the legislation into law if it reaches his desk, a spokeswoman said. The measure, which passed 86-8, is aimed at reducing U.S. reliance on foreign sources of oil.
"This is a positive psychological boost to the most important new demand factor for corn," said Jerry Gidel, a market analyst for North American Risk Management Services Inc. in Chicago. "There remains bipartisan support in Congress for increased use of ethanol."
Corn futures for March delivery rose 3.25 cents, or 0.7 percent, to $4.3825 a bushel on the Chicago Board of Trade. The price earlier reached $4.40, the highest since Feb. 26, when corn climbed to a 10-year peak of $4.5025. Futures rose 5 percent this week, the second straight weekly gain, and are up 12 percent this year.
Ethanol futures on the CBOT soared to a six-month high. Denatured ethanol for January delivery advanced 3.2 cents, or 1.6 percent, to settle at $2.081 a gallon, the highest since June 5.
Pelosi Support
The House of Representatives will take up the legislation next week. Speaker Nancy Pelosi said she will back the plan, calling it a "substantial policy advance."
In 2006, almost 5 billion gallons of ethanol were produced, according to the Energy Information Administration, the Energy Department's statistical arm.
There are 134 ethanol distilleries in the U.S., with the capacity to produce 7.23 billion gallons of the fuel annually, according to the Renewable Fuels Association in Washington. The 77 plants under construction will boost the nation's production capability to about 13.45 billion gallons.
U.S. demand for corn to produce ethanol is forecast at 3.2 billion bushels in the marketing year that began Sept. 1, down from an earlier estimate of 3.4 billion, the Department of Agriculture said Nov. 9. Demand for corn used to produce the biofuel rose 32 percent to 2.1 billion bushels last year.
U.S. farmers just finished harvesting a record crop of 13.2 billion bushels, up 25 percent from last year, the USDA estimates.
Shares of ethanol producers rose today.
Aventine Renewable Holdings Inc. of Pekin, Illinois, soared $1.05, or 10 percent, to $11.34 at 2 p.m. in New York Stock Exchange composite trading. Pacific Ethanol Inc., based in Sacramento, California, rose 58 cents, or 9.6 percent, to $6.62 in Nasdaq Stock Market trading.
Corn is the biggest U.S. crop, valued at a record $33.8 billion in 2006, with soybeans in second place, at $19.7 billion, government figures show. Wheat is the fourth- largest crop, behind hay.
