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Renewable Accounts: How Much Corn Can the Ethanol Industry Use?

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David Ripplinger, Bioproducts and Bioenergy Economist and Assistant Professor, NDSU Department of Agribusiness and Applied Economics David Ripplinger, Bioproducts and Bioenergy Economist and Assistant Professor, NDSU Department of Agribusiness and Applied Economics
A good number to commit to memory is 14.9 billion gallons. That’s the capacity of the domestic corn ethanol refinery fleet.

By David Ripplinger, Bioproducts and Bioenergy Economist and Assistant Professor

NDSU Department of Agribusiness and Applied Economics

Energy security, environmental benefits and rural economic development are among the primary arguments in support of biofuels. A fourth, although not always highlighted issue, has challenged agricultural economists and policymakers for decades. It is how to best manage supplies, given the havoc that overproduction and low prices cause. One solution, driven in large part by commodity groups, has been the development of new and higher-value uses for crops.

The issue is especially important today as the U.S. moves toward an expected record corn crop. Forecast at just more than 14 billion bushels, the 2014 crop would be 30 percent larger than the drought-impacted crop in 2012 and 25 percent larger than the corn crop of 10 years ago.

So what are we going to do with all this corn? The main options are to feed, burn, export or store it.

My position focuses on the burning part, which means converting corn to ethanol for use as a transportation fuel, as well as other higher-value uses. Supported in part by relatively low corn prices, returns to ethanol production have been very strong this year. Given the large 2014 corn crop and other supporting factors, this is expected to continue into 2015. The economics would lead one to expect that ethanol production would be going full-bore.

Before diving into production and use statistics, a good number to commit to memory is 14.9 billion gallons. That’s the capacity of the domestic corn ethanol refinery fleet. It’s also just less than 10 percent of the current pace of motor gas use. Since Oct. 1, 2013, the fleet has been operating at 94 percent capacity. It has ranged from 90 percent during the late winter to more than 100 percent in June (yes, plants can run above capacity). Winter production deserves comment because harsh weather and rail delays slowed or, in the case of some refineries, stopped production, which kept numbers lower than they would have been.

How does this translate to corn use? Well, it depends on how much corn it takes to make a gallon of ethanol. The value used by policymakers, industry, Extension economists and others varies from 2.7 to 2.8 gallons of ethanol from a bushel of corn. Newer and retooled plants generally are more efficient.

Right now, based on data from the Energy Information Administration, it looks like between 14.05 billion and 14.1 billion gallons of ethanol will be produced during the 2013 to 2014 crop year. I’m not big on unnecessary precision, but that 50 million gallon swing is a difference of about 18 million bushels of use in just six weeks.

A bigger issue is corn ethanol refinery efficiency. If plants have been running at 2.7 gallons of ethanol per bushel of corn, we’ve used 5.2 billion bushels during the current crop year. If the conversion has been 2.8 gallons per bushel, we’ve only used 5.02 billion bushels. A difference of 180 million bushels is significant because the lower number would increase projected ending stocks by 15 percent, which would drive down corn prices.


NDSU Agriculture Communication – Sept. 22, 2014

Source:David Ripplinger, (701) 231-5265, david.ripplinger@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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