US maize harvest under cloud...

  • 06/05/2008

  • Business Standard (New Delhi)

Bad weather is threatening a big shortfall in this year's US maize harvest, according to US officials, risking a further upward push to food and energy prices. Maize is the main feedstock for US ethanol. A further rapid rise in its price is likely to add to growing concern on Capitol Hill that federal biofuel subsidies are worsening the food crisis. The draft "farm bill", which is being negotiated between Congress and the White House and will set agricultural policies for the next five years, contains only a small cut in ethanol subsidies, from 51 cents a gallon to 45 cents. The US also imposes an import tariff of 54 cents a gallon, which keeps out cheaper sugarcane ethanol from Brazil. Farmers have reported that they are intending to plant only 86 million acres of maize in 2008, down 8 per cent from last year, because of higher input costs and better returns from other crops. Officials are warning that the cold rainy spring across much of the maize-growing states may reduce that further. Joseph Glauber, chief economist for the US agriculture department, told Congress last week that maize prices were likely to rise again in 2008-9. "Cool, wet weather has slowed planting progress, which could also contribute to lower maize plantings in 2008," he said. "With higher use and lower production, ending stocks are expected to decline, keeping upward pressure on prices." Glauber said that ethanol was likely to consume 24 per cent of the maize harvest. One former administration official said that only 14 per cent of the maize crop was planted by the end of April, rather than a third as usual. "The wet weather can start affecting maize yields from the beginning of May," the former official said. "Unless we see better weather in a couple of weeks, farmers will start to plant soy instead of maize. Prices could go to $7 or $8 a bushel and we will have a lot of controversy." Maize prices for delivery in September averaged about $6.20 a bushel in April and, unlike wheat and rice, have not fallen back in recent weeks. The US agriculture department will release updated estimates of farmers' planting intentions later this week. Lawmakers on Capitol Hill, even some from maize-growing states, have increasingly questioned ethanol subsidies. Dick Durbin from Illinois, the majority whip in the Senate, told reporters last week: "I supported ethanol from the beginning and still believe in it but we have to look at it honestly. What is the current impact and what do we have to do, if anything, to address any changes?" Jeff Bingaman, chairman of the Senate energy and natural resources committee, has indicated a willingness to revisit the issue. John McCain, the Republican presidential nominee, and Barack Obama, front-runner for the Democratic nomination, have expressed concern.