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Agriculture Today

Corn production, prices fuel debate

Corn production, prices fuel debate
Distillers grain is a by product of shelled corn processed for ethanol.

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Wilson County News
October 3, 2012
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It’s a continuing debate. “If you stop producing ethanol, feed prices will come down, bringing food prices down.” “If you stop producing ethanol, gas prices will go up!” As the drought continues, corn is a hot topic.

As 65 percent of the lower 48 states experience moderate to exceptional drought, according to the Sept. 18 U.S. Drought Monitor, interest is building to see what the actual corn harvest will be. Each report of the potential corn harvest is followed by prices that continue to climb, followed by reports of increased feed prices for feedlot operators to increased prices for food on the table, to increased prices for fuel.

Many believe the demand for corn from feedlots, the export markets, and ethanol production is to blame for the ever-increasing price of feed.

But it’s not that simple.

Matt Hartwig, communications director for the Renewable Fuels Association, answered questions in July to help Wilson County News readers understand how U.S. ethanol from corn feeds and fuels the world.

Farmers’ share

Hartwig said many people hold the mistaken belief that farmers get back a large portion of each dollar spent for food. This is not so.

“According to the U.S. Department of Agriculture,” Hartwig said, “only about 12 cents of every retail dollar spent on food pays for the farm value of the agriculture ingredients in our groceries. The remaining 88 cents pays for energy, packaging, food processing, transportation, and other costs. Petroleum and other energy costs affect every link in the food-supply chain.”

Not just fuel

With reports that corn prices will reach historic highs due to the worst U.S. drought in 50 years, Hartwig explained ethanol’s contribution to the feed sector.

“Modern ethanol production is about more than fuel. Producers are providing increasing amounts of livestock feed products -- distillers grains, corn gluten, and corn gluten meal -- while simultaneously providing growing volumes of corn oil and other bio-base products to replace oil,” Hartwig said.

For every bushel of shelled corn weighing 56 pounds, 17.5 pounds of dried distillers grains (livestock feed) and 2.8 gallons of ethanol are produced.

According to an Oct. 25 Renewal Fuel Standards press release, “One of the reasons that one ton of distillers grains can replace more than one ton of conventional feed is that its energy and protein content are concentrated. Only the starch portion of the corn kernel is converted to ethanol, while the protein, fat, fiber, and other components are concentrated and passed through the process to the distillers grains.”

“In 2011, the U.S. produced more than 39 million metric tons of high quality livestock feed,” Hartwig said.

Cutting production

“Based on weekly ethanol production data through July 6, year-to-date ethanol production has averaged 900,900 barrels per day. This implies annualized production of 13.81 billion gallons. ... However, if high corn prices continue to pressure ethanol production, annual output will be somewhat lower,” Hartwig said.

This was evident in the July 31 Renewable Fuels press release, in which the association’s president and CEO Bob Dinneen said, “ ... The weather impacting much of the country is a very real cause for concern. The ethanol industry, like any other end user of corn, understands this point and the industry has significantly reduced its corn consumption in recent weeks.”

In late July, weekly ethanol production fell “below 800,000 barrels per day -- a level not seen since June 2010,” according to Renewable Fuels. Two ethanol blends are common in the United States. See “Ethanol blends” for more.

In a July 27 report, Dinneen said, “Since the first week of June, which is when corn prices began to surge in response to worsening drought conditions, ethanol consumption of corn has fallen nearly 14 percent and is at a two-year low. In this same period, corn export inspections actually increased 15 percent.”

Fuel cost savings

Although the 2012 drought will increase the price of food, ethanol had assisted in keeping fuel prices down for more than a decade.

“In May, a report from the Center for Agricultural and Rural Development (CARD) showed that America’s growing use of domestically produced ethanol reduced wholesale gasoline prices by a national average of $1.09 per gallon in 2011,” Hartwig said. “Specifically in the Midwest, savings were $1.69 per gallon.”

The 2011 results are higher than the average impact of 89 cents per gallon in 2010, according to a study conducted by economics professors at the University of Wisconsin and Iowa State University.

Data scanning a decade indicates ethanol has saved U.S. drivers more than $477 billion in gasoline expenditures since 2000.

“American ethanol reduced our dependence on the OPEC cartel and unfriendly or unstable regimes who used to raise prices at will,” according to an Aug. 28 editorial by Dinneen. “Eighty percent of the new motor fuel produced in the United States since 2005 has been ethanol.”

Dinneen concluded, “While it is difficult to imagine that gasoline prices could have been higher than they were at their worst points over the past year, the pain at the pump would have been even worse without ethanol.”

Ethanol blends

One may have noticed the ethanol percentage on signs at gasoline pumps, with the most common ethanol blend of fuel being E10 (10 percent ethanol, 90 percent gasoline). According to Hartwig, 97 percent of gasoline contains this blend, which has been approved for all vehicles including small engine and marine equipment.

“In January 2011, the U.S. Environmental Protection Agency approved the use of E15 (15 percent ethanol, 85 percent gasoline) fuel in light duty cars, trucks, and SUVs model year 2001 and newer and all flex-fuel vehicles,” Hartwig said. “E15 has been the most thoroughly tested fuel in American history and ethanol has been a safe and effective fuel component in wide use for more than three decades.”

Hartwig added, “E15 has not been approved for use in vehicles older than 2001, small engines, boats, and motorcycles.”

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