Economist Surprised by USDA Figures

Some of the numbers in the USDA December World Agricultural Supply and Demand Estimates (WASDE) took American Farm Bureau Federation senior economist Terry Francl by surprise.

“The most dramatic change in the December WASDE report was the big drop in corn used for ethanol production,” said Francl in an AFBF press release. “I am surprised that corn use for ethanol dropped by that much. Demand for ethanol is down, just like demand for gasoline is down, but I just don’t think the decline is that large. I believe 3.8 billion bushels to 3.9 billion bushels is closer to the mark.”

The WASDE estimates corn used for ethanol production this year at 3.7 billion bushels, down 300 million bushels from the November estimate. Francl explained that a number of ethanol plants are idled due to weak demand, which explains the drop in corn used for ethanol. However, the Renewable Fuel Standards would seem to imply that at least 3.8 billion bushels of corn will be utilized for ethanol production in 2008/09.

He does seem to agree with the estimate for exports, which was lowered 100 million bushels from November to 1.8 billion bushels. “The drop in corn exports is more on target due to the weakening global economy,” Francl said.

The AFBF economist expects a further weakening in corn exports in 2009 due to the economic slowdown.