The continued adjustments in the amount of corn being refined into ethanol have always been upward and with a 58% increase in new crop corn now predicted for use in ethanol production, some of the 10-year projections will have to expand as well.

USDA's current projections are for 12 billion gallons of ethanol to be produced from corn in 2016, which is the end of the current 10 year baseline of economic projections. Along with ethanol production, USDA is estimating there will be 700 million gallons of biodiesel refined from soybean oil by 2016.

Concerned that the current trend points above those benchmarks, USDA chief economist Keith Collins has looked at the impact of two 2016 scenarios: one with a 15 billion gallon ethanol production and the other with a 20 billion gallon production. Biodiesel production was also raised to one billion gallons, for the purpose of analysis.

For his 15 billion gallon scenario, around one billion bushels more corn than the current USDA baseline would be required; the 20 billion gallon scenario would need 2.85 billion bushels more. The one billion gallon biodiesel production would need 2.2 billion gallons of soybean oil and that would take 31% of annual production.

And he says that this will effect the livestock feed market. With the ethanol refining process, most of the production will be from dry milling plants and that means additional distillers' grains (DDGS) would be produced, replacing some of the corn that would ordinarily be fed to livestock, says the chief economist.

"The displacement factor of DDGs for corn in the feed ration depends on the type of animal. One pound of DDGs is assumed to displace one pound of corn for beef cattle, 0.45 pound of corn for dairy cattle, 0.85 pound of corn for hogs, and 0.55 pound of corn for poultry."

And he says some of that will replace soybean meal in livestock rations, "Each additional bushel of corn used in ethanol production produces DDGs that displace approximately 1.2 pounds of soybean meal."

Source: Agriculture Online