No place demonstrates the competing demands on corn better than Iowa, one of the two biggest corn-exporting states. Iowa is home to 28 ethanol plants, which consume more than a quarter of its corn crop; two dozen others are under construction or in planning stages.Two leading oil pipeline companies are exploring the feasibility of building a $3 billion ethanol pipeline, the first of its kind, to link Iowa and other parts of the Midwest with motor-fuel markets in the East. It would carry 3.65 billion gallons a year and give another industry a vested interest in maintaining high ethanol output. Because of this domestic demand, Iowa's exports of corn are expected to shrink to less than half of current levels in the next couple of years. Nationwide, corn stockpiles are dwindling.
All that could make this cycle of corn prices different from previous ones, when prices eventually fell back. "As long as you keep that ethanol industry running, grain prices will be high," says Bruce Babcock, professor of economics and the director of the Center for Agricultural and Rural Development at Iowa State University. "If you didn't have this large growth in ethanol corn, prices would be nowhere near where they are today."
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