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Friday Washington Post article on Ethanol

JamesBailer

New member
Here's a little something from the front page of Friday's Washington Post. I found this part interesting:

"The president's goal is to have 35 billion gallons of biofuels by 2017, and we're currently at 6 billion gallons. That would mean a huge increase in land for corn," says Jerry Schnoor, a University of Iowa professor of civil and environmental engineering. "The environmental constraints are just too great. It's too much nutrients, too much soil loss, too much pesticides. We don't have the land."

Ethanol advocates vow that the next generation of technology will make ethanol more attractive environmentally. Cellulosic ethanol could be made from cornstalks or, better yet, from perennial crops such as switchgrass. But that's the future. Today, corn, and specifically corn kernels -- little nuggets of starch -- are the sole source of commercial ethanol.

Seems like the ethanol mouthpieces like the Renewable Fuels Association and many others need to tell us exactly how their "vows" are going to become reality.
 

HAY MAKER

Well-known member
Ethanol has become one of the first successful alternative fuels available for nationwide use, not only displacing 10% of gasoline, but providing EPA mandated oxygenates in the fuel.



"But without the large increase in oil and gasoline prices that has taken place since 2002, we would not be experiencing today's ethanol boom." That's the analysis of Bob Hauser, agricultural economist at the University of Illinois, who heads the Agricultural Consumer, and Environmental Economics Department, which has just released an extensiveeconomic evaluation of ethanlol and its impact on the US. Pointing to the rise in petroleum prices in the past five years and the corresponding ethanol production that began about the same time, Hauser says the price of corn, subsidies, trade barriers, and renewable fuel policy have also helped the surge in ethanol use.



Currently 131 ethanol plants are producing 7 billion gallons, and 82 more are in construction that will produce an additional 6.45 billion gallons; all of which would consume 4.8 billion bushels of corn. Hauser's colleagues "ran the numbers" on ethanol and using $4 corn with a 12% rate of return, they calculated the break even cost for a new plan would be $2.34 per gallon of ethanol, and at $2 corn the break even price declines to $1.62. But the economists say those prices are also dependent upon the values of co-products, governmental subsidies, and the technical abilities of ethanol as a motor fuel.



The economists contend the 51 cent per gallon federal blending subsidy has been a significant driver of ethanol demand, and if it were eliminated, then the break even level for ethanol production would be the same for both $2 and $4 corn. But Hauser says, "The effect of the subsidy is to create a breakeven ethanol price for $4 corn that could only be achieved with $2 corn without the subsidy." Hauser says if the long term expectation for the price of oil is to be $60, then the implied break even price for ethanol refiners to pay for corn is $3.50, and with the significant demand for ethanol, then the equilibrium price for corn will be $3.50 per bushel.



Summary: No one questions the value of ethanol in raising commodity prices following more than two decades of ardent support by corn farmers. However, the relatively sudden demand has been aided by the price of oil and a prior foundation that included governmental policies. Ethanol has helped corn to a new equilibrium price of $3.50, which will have impact on livestock production, competing crops, land values, and numerous other factors. Ethanol production has also sparked changes in the Cornbelt, including drawing livestock production closer to ethanol plants which produce DDGS. The next generation of ethanol may be oriented away from corn and more toward grasses and corn stalks. We encourage everyone with an interest in the issue to take a look at the report section by section online at the University of Illinois Extension farmdoc website.



Source: University Of Illinois Ag Extension
 

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