By Prasenjit Bhattacharya
   Of DOW JONES NEWSWIRES


  SINGAPORE (Dow Jones)--Corn prices are likely to reach  unprecedented highs
in the next 2-3 years, as a growing ethanol boom in the United States is likely
to severely limit its availability for food and feed use.

  This has fueled concerns that corn, a staple food ingredient in many
countries and widely used as feed in the poultry and livestock sectors, may go
out of reach for poorer consumers, boosting food prices in general.

  Soaring food prices could cause urban riots in scores of low-income countries
that rely on grain imports, such as Indonesia, Egypt, Algeria, Nigeria and
Mexico, said Lester R Brown, founder of Earth Policy Institute and author of a
recently released report on potential corn demand from the ethanol industry.

  The report said the ethanol distilleries being built in the U.S. will need
139 million metric tons of corn by the 2008 harvest, far more than a U.S.
Department of Agriculture estimate of the requirement, pegged around 60 million
tons.

  "If the Earth Policy Institute estimate is at all close to the mark, the
emerging competition between cars and people for grain will likely drive grain
prices to levels never seen before," Brown said.

  Apart from being the biggest corn grower, the U.S. is also the leading corn
exporter in the world. Since 2006, corn importing countries have became more
dependent on U.S. corn as China cut back on exports amid increased domestic
demand from its own ethanol industry and fears of a supply shortage.

  Brown is not alone in warning that an ethanol boom may lead to sharp rise in
corn prices by creating a supply squeeze.

  "If biofuels continue to expand globally, you can expect grain prices to move
to their energy equivalent, until cellulose and other alternative energy
sources become commercially available," said Simon Bentley, analyst with
U.K-based LMC International, a commodities research firm.

   Supply-Side Response Still Unclear


  Bentley said that while sufficient land is available to expand corn output in
the U.S. and Brazil, how such expansion will affect output of other crops,
especially soybean, and corn prices, in turn, remains the key question.

  According to a recent report by JP Morgan, average corn prices are expected
to be around $4.03/bushel in 2007, up sharply from  $2.51/bushel in 2006, a
jump of 60.5%.

  The third-month corn contract on the Chicago Board of Trade closed at
$3.76/bushel Thursday, sharply higher from $2.55/bushel on the same day last
year.

  The JP Morgan report said that ethanol industry's growth calls for an
additional 500 million-1 billion bushels of corn every year.

  While such rapid rise in demand in itself will ensure high corn prices, the
study added that any weather threat to the corn crop this year will be "met
with record high prices."

  Not surprisingly, China a large producer and consumer of corn, is already
taking measures to ensure domestic availability.

  In December, the Chinese government stopped approving new corn-based ethanol
plants.   "As of now, it seems the government is reluctant to permit additional
capacity for corn-based ethanol production, though existing corn-based ethanol
plants are functioning normally," said Gu Lifeng, manager of the maize division
at the Beijing-based state-run Cofco Maize Co. Ltd.

  Lifeng said it is unclear if the restriction on additional corn-based ethanol
capacity is a long-term policy or just a short-term measure.

  Meanwhile, Chinese corn processors are rapidly ramping up their alcohol
production capacity, which can easily be converted into ethanol plants if the
government relaxes its stance.

   Higher Prices May Lead To Feed Stock Substitutes


  Arthur J. Ragauskas, associate professor at the Georgia Institute of
Technology, who recently co-authored a paper on biofuels in industry journal,
Science, said the key to sustainable biofuels industry is cheaper feedstock,
not expensive corn.

  "As demand for corn increases, so too will its prices. This will drive the
ethanol industry to look for lower cost feedstock and as these alternatives
develop, price and demand will stabilize," said Ragauskas.

  He said the food-vs-fuel debate can generate new ideas if there is increased
collaboration between the academia, governments and the private sector to
develop nonfood biomass, such as switch grass, recycled waste materials and
corn stovers into viable resources for biofuels.

  The corn growers' lobby in the U.S. however continues to argue  that there
will be enough corn in the long-term to meet food, fuel and feed needs.

  "All demand for corn - food, feed, fuel and exports - are being met. Farmers
have always responded to price signals from the marketplace and historically we
have had much more challenge with overproduction than shortage," Rick Tolman,
CEO of the National Corn Growers Association said.

  "Market forces, not broad assumptions, are driving ethanol and corn
markets...  There is no conflict between the two (corn use for food and fuel),
nor any pending crisis," Tolman said.