Ethanol: Full speed ahead

Sorry Texas, the EPA is just messin’ with you. The Environmental Protection Agency today denied the state’s request for a waiver on the requirement that oil companies add about 9 billion gallons of ethanol to their fuel this year.

It’s the issue that’s pitting farmer against farmer. Sure, ethanol is making money for farmers who raise corn, but it’s taking some money away from cattle producers who are seeing the price of corn increase their cost of feed.

It’s been an emotional issue at FarmFest this week, the Bemidji Pioneer reported today (registration required)

While not opposed to ethanol — something he uses as a farmer — (Edgerton Minn., farmer Randy) Spronk said livestock producers are at a disadvantage because federal and state laws now favor using corn for fuel compared to livestock feed. Federal policy “has distorted the corn market,” he said.

“Will we have enough corn to produce food and how will these consumers spend their limited food dollars?” he asked.

No one on either of two panels at FarmFest could guarantee that the corn will be available for livestock.

Sitting next to Spronk in one panel discussion was Hector, Minn., farmer Steve Kramer, secretary of the Minnesota Corn Growers Association. He said ethanol use is a relatively small factor in price increases.

“The marketplace will balance out,” Kramer predicted. “There is no shortage of food caused by the diversion of corn.”

Others object to the environmental fallout from the production of ethanol. And a report cited by the Guardian says ethanol is at the heart of the world food crisis.

Sen. John McCain had called for an end to the ethanol mandate. Sen. Barack Obama is for it.

The administration’s pumping up ethanol is good news for agri-giant Archer Daniels Midland, according to the financial Web site Motley Fool.

Speaking of ethanol, management made a few interesting comments on its conference call regarding the market for the much-debated fuel additive. For what it’s worth, ADM management stated their optimism that Texas’ request for a waiver on the federal ethanol mandate would not be granted… Archer still foresees strong demand. The blending economics are just that attractive, with ethanol providing cheap octane for gasoline. Archer actually cited blending in excess of the mandate.

Even without the mandate, however, some analysts figure ethanol is here to stay because there’s too much money to be made producing it, according to the Minnesota-based agriculture newspaper Feedstuffs.

Jerry Gidel, analyst for North American Risk Management Services, said he does not anticipate EPA will change the RFS levels after the recent sell off in corn prices and the nearly 10 billion gallons in current biorefinery capacity. Gidel added the extra renewable identification numbers (RIN) in the marketplace will factor into not changing the RFS, particularly since the current 75-78 cent discount of ethanol will override anything the EPA does, he said. “The economic incentive to blend and make money is too strong for the energy distributors not to use as much ethanol as their updated facilities will handle. The lack of splash & dash facilities is the only reason for any slowdown in what the ethanol industry might be able to produce at current corn prices,” Gidel said.

  • Both ethanol and biodiesel are here to stay, which is a good thing, as both are largely renewable and produce less emissions and lifecycle greenhouse gases.

    Perfect? No. Better than oil? You betcha.

  • Greg

    “pitting farmer against farmer”?

    Wait a minute! Great sound-bite, but lousy news analysis.

    What about exports? A ton of corn exported to China is equally unavailable to livestock producers as is a ton of corn sent to the Ethanol plant.. So why the howling about Ethanol amidst the utter silence regarding exports?

    But wait another minute!

    Is a ton of corn sent to the Ethanol plant really unavailable to livestock producers?

    Hint: what is the second largest product of Ethanol production?

    (drum-roll please)

    Livestock feed… Yup, that’s right…livestock feed in the form of distillers grain (DG) and distillers dry grain (DDG). The big issue is not the scarcity of corn; it is the inability of some producers to upgrade their facilities to keep pace with changes to agriculture.

  • Bobby

    As is, ethanol is dead end. Bad for the earth, bad for fuel economy and absolutely horrible for tax payers who must subsidize the heck out of it just to keep it going. We’re on to you Mr. Ethanol – it’s just a matter of time until everyone (not just Texas) is calling for a repeal of the ridiculous ethanol mandate.

  • GregS


    90% of Ethanol usage is to comply with Federal Clean Air Requirements. If you remove the Ethanol mandate, you are going to have to find a substitute for Ethanol as oxygenator and octane booster for gasoline.

    Good luck with that.