There's a lot of speculation and discussion about ethanol and how it's going to save us going around these days. Myself, I'm a bit of a skeptic and feel that turning all of U.S. corn production into ethanol wouldn't even make a dent in our fossil fuel needs, and that we'd starve ourselves in the process. I've even seen some say that cargo ships are sitting idle because no corn is available due to corn being diverted to ethanol production. And commodity prices seem to be rising fast because of the increases in demand because of this rush to be "saved" by ethanol, at least if you can believe the things you hear. There seems to be plenty of spin and wishful thinking going around, and emotion seems to drive a lot of the debate over what's true about ethanol. The volume on this is starting to get loud and make my head spin, so I thought I'd ask a friend of mine who is a Professor of Agronomy in the Department of Crop and Soil Sciences at Penn State University and has some expertise in the field whether my thoughts on the whole situation make any sense. After all, there's nothing like facts to ruin a perfectly good argument! Here's the response I got from him:
Bob,
You are correct, corn ethanol is not going to meet our transportation fuel needs. Nobody is claiming that from the ethanol industry.
The vision of the National Corn Growers Assn. is that by 2015, we will be able to produce 15 billion gallons of corn ethanol using a 15 billion bushel corn crop. Of that 5 billion will be used to produce ethanol, and 10 billion will be available to meet food feed and export needs.
During the past few years, we have produced crops in the 10-11 billion bushel range and have been creating surpluses. This year we should make close to 13 billion bushels and again will have a large surplus. In fact, the corn price has declined significantly since spring. Many commodity traders are actually worried about our capacity to store this falls crop.
There are many good things about ethanol for the ag community and the Midwest. It’s a higher value use of the crop so farmers make more money. This allows them to buy more combines, tractors etc. and pay more rent to landowners in the Midwest. The ethanol plants have revitalized the economy of many Midwest towns that were depressed before. They have also created demand for stainless steel and rail cars so those industries are benefiting as well. And they are making about 5 billion gallons of fuel that we are not buying from Venezuela, Russia, or some other dubious source. Aside from the obvious balance of trade issues, there are also long term geopolitical issues from this dependence.
Ethanol is subsidized by the government and some have issues about this. The increase in corn price due to the ethanol demand has reduced farm subsidies about the same extent, however.
So the net effect of the ethanol issue for the federal treasury has been negligible. The higher price though has stimulated corn production in other countries that could not compete with us when we were subsidized production and selling it below the cost of production.
The other issue is the effect on food prices. Corn makes up a very small part of the retail price of food so increases in price have little impact on retail food prices. Corn sells for about 7 cents a pound, even with the higher prices. A 12 oz box of corn flakes sells for about 2.20. So corn could double again in price and you probably would not notice it in your corn flakes.
Some industries, like cattle and chicken feeding are spending a lot more on corn than they used to, but they also have access to dry distiller’s grain, an economical feed that can replace some of the corn, especially for cattle.
So in the end, corn is not the complete answer to our transportation fuel issues, and corn ethanol will not likely dramatically increase food prices. Some have said it is a good first bunt. We have a lot of unused capacity to grow corn. In fact, due to low prices in the past, we have paved over, built houses, and taken ag land out of production.
Cellulosic ethanol will likely come on in a few years and eventually will be producing much more than corn ethanol. The hope is that combining corn ethanol, cellulosic, biodiesel, hybrid vehicles, higher mileage standards and other technologies we may be able to reduce our dependence on imported fuels by 30-40% by the end of the next decade or so.
If your readers are interested in an economical high performance fuel, they might want to checkout E-85, which was featured on Jay Leno's website last week.
If all this has you aching to fill up with an E-10 blend or so, stop in at the Sunoco across from Wal-Mart.
If you need anything else or some documentation or links, let me know.
Not that that settles anything, but it does give me some ammo to counter the folks who seem to think that all we have to do is turn our corn into ethanol and we'll be able to watch OPEC try to figure out ways to enjoy crude oil soup. It's never as simple as those who see a simple solution think it is.
Boon, or boondoggle
Maybe it's a bit of both
Which way ethanol?
