Ethanol gets a boost from lower corn costs

Ethanol E-85 enthusiast Donald O. Brown talks to a motorist in Minneapolis where he tried to convince her to try the high-ethanol blend of E85 in July 2009.

There’s a lot of debate over the value of the nation’s ethanol industry. Some people think the corn based renewable fuel is an energy wasting, polluting fraud. Supporters say it represents the best side of U.S. ingenuity, and that it’s helping make the nation energy independent.

While those arguments continue unresolved, ethanol has made a big comeback as far as profits are concerned.

An Iowa State University study says that a typical plant has been making anywhere from 40 to 80 cents a gallon profit on its ethanol over the last few months.

A big reason for that is a sharp drop in the price of ethanol’s basic ingredient, corn. Last fall’s large harvest has depressed prices. Corn right now costs about $4.50 a bushel at a Minnesota grain elevator, compared to $6-$8 over much of the last two years. At those high prices, most ethanol plants were losing money on every gallon produced.

Adding to the good news for ethanol companies, the federal Energy Information Administration says those companies are making respectable money on ethanol by-products as well as on the fuel itself. Much, but not all, of the corn kernel is used to make ethanol.

The EIA’s Sean Hill says the leftover portion of the kernel is something “that ethanol producers can then sell as animal feed.”

He says this dried distillers grain as it’s known, is adding as much as 60 cents of profit to each gallon of ethanol produced.

Another sales area that’s boosting profits at ethanol plants is the export market. Last year U.S. producers exported more than 600 million gallons of the fuel. That’s more than one billion dollars worth of ethanol. Hill says exports this year are also expected to be strong.

With plenty of cheap corn available, the U.S. can make and sell ethanol at lower prices than most nations. Canada and Brazil have been the strongest markets for U.S. ethanol. But the fuel also goes to Western Europe, the Middle East and Asia.

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