Demand from ethanol makers is the “key driver” in the soaring price of corn, according to the “Business Insider” newsletter. Corn will stay high because of the continuing ethanol demand and tight carryover stocks, it said.
“The key driver for corn prices–beyond weather, inflation and other factors driving up all agricultural commodities–is ethanol use,” said the article by Gus Lubin. “Corn for ethanol use has soared from less than 500 million bushels in 1999 to 5,000 million bushels in 2011.” The article cited commodities expert Jim Sullivan, who predicts a “modest increase” in usage of corn for ethanol next year.
“But we are still only going to build stocks to about 881 million bushels, which would increase the stocks-to-use ratio to about 6.5 percent,” Sullivan said. “These tight ending stocks should keep prices high, and it just does not leave much room for any kind of a production shortfall without driving prices higher.”
