* Sugar and corn are two main feedstocks for ethanol
* Supplies of high protein wheat may tighten
* China farm policy evolving rapidly
By Nigel Hunt
LONDON, June 6 (Reuters) - A sharp fall in global sugar prices poses a threat to U.S. ethanol exports and related demand for corn, Seth Meyer, chairman of the U.S. Department of Agriculture’s World Agricultural Outlook Board, said on Tuesday.
“That is certainly one area we will certainly keep an eye on because it is an area of risk. We are doing a fair amount of export business,” he told Reuters on the sidelines of the International Grains Council’s annual conference.
The United States uses corn to make ethanol while its main competitor Brazil uses sugar cane to produce the renewable fuel.
Global raw sugar prices slid to a 15-month low of 13.63 cents per lb late last week and have fallen around 40 percent during the last eight months. During the same period corn prices have risen about 5 percent.
In Brazil, low sugar prices can encourage more use of cane to produce ethanol.
Brazil’s Copersucar SA on Monday cut its outlook for sugar production in the 2017/18 centre-south cane crop. It also raised its projection for ethanol production.
Meyer said he was also keeping a close watch on developments in China which has been selling some of its corn stocks but still holds substantial amounts of wheat and rice.
China sold around 20 million tonnes of old corn from its state stockpiles in 2016.
The world’s number two producer might see less need to hold large inventories given the current comfortable level of global supplies, he said.
“If you rough out some numbers of the Chinese selling 2012 and 2013 corn stocks and the loss those must be taking, it has been a very expensive proposition for them to hold that grain,” he said.
Global corn prices rose above $8 per bushel in 2012 and are now well below $4.
Meyer noted U.S. agricultural policy had evolved over decades but China had compressed its learning curve into a much shorter period of time.
“They seem to be very willing to make quick turns on policy in some areas,” he said.
Meyer noted there were concerns about potential tightness in the supplies of high protein wheat linked partly to concerns about dryness in U.S. spring wheat areas and a possible decline in protein level for this year’s hard red winter wheat harvest.
“It’s not just a U.S. issue, it is also the Canadians and elsewhere where there doesn’t seem to be an abundance of protein,” he said. (Reporting by Nigel Hunt; Editing by Susan Fenton)