Ethanol demand might cause a corn price spike this winter, but it might be short lived.
“The world is going to respond to a higher price,” said Joe Victor of U.S. analysis firm Allendale Inc., which is predicting possibly “explosive” price increases in corn this winter.
“Do not be holding this grain corn past July 2007.”
Such a rally will cause the world to produce much more corn in coming years, said Victor, who thinks corn could rise to $3.40 to $3.60 US per bushel.
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Victor said his views are influenced by the way the world’s farmers reacted in 2003-04 to tight corn stocks.
World corn stocks fell to 103 million tonnes at the end of that year. The next year, production soared to 712 million tonnes, a 14 percent increase over the 625 million tonnes produced the year before.
“We couldn’t believe our eyes that year,” said Victor.
“Hungary was exporting corn to U.S. customers.”
Russia, Ukraine, Canada, Brazil and other countries could all expand their corn and wheat exports next year, and many importing nations could increase production to lower their import needs.
Longer term, other alternatives might displace corn ethanol.
“There’s enough creativity in the world, whether it’s wind, solar, cellulosic, you name it, that the writing’s on the wall,” he said.
“We believe that if we’re not at the peak (of the corn-ethanol boom), we’re pretty close to the top of this bell curve.”
