What is in this article?:
- Ethanol study points to major savings at the gas pump
- Reduced prices by 28 cents per gallon
- Feed versus fuel savings
• Updated study finds that between 2000 and 2011, benefits of ethanol included reducing U.S. wholesale gasoline prices by 29 cents per gallon nationwide.
• Study authored by economists at Iowa State University's Center for Agricultural and Rural Development.
• Touted by the Renewable Fuels Association.
Feed versus fuel savings
Hayes is not an ethanol cheerleader without hesitation. In the earlier report, the CARD economists considered what might happen to U.S. gasoline prices if ethanol suddenly went away. That issue was not included in the study update. Why not?
“We do now depend on ethanol to provide 10 percent of our gasoline supply,” said Hayes. “Ethanol is made with a product, corn, whose yields are determined by weather. There can be a year when we have bad corn harvests and, therefore, reduced ability of ethanol production. That’s a real issue.
“The big concern for me is that in 1995-1996, the United States literally ran out of corn and had to harvest new crop, wet corn to feed our animals. So, supply scarcity of corn can occur.
“If you look at the futures market, there are some people who are concerned that we could have a scarcity of corn this summer. Everyone assumes if there is a scarcity, we’ll shut down the biggest user of corn, which is ethanol.
“But the summer is when we drive most often. We simply can’t take 10 percent of the gasoline out of production by shutting down ethanol overnight. … It would be like shutting down 10 percent of the refineries. We’d have a big price spike in gasoline until we could start importing it again.
“It’s a concern and I tried to raise it. It didn’t go anywhere and nobody seemed to be too worried about it so I didn’t (include) it in this year’s report.”
What about ethanol’s impact on the U.S. livestock sector? Higher feed costs are often attributed to ethanol production but might that input cost be mitigated by lower fuel costs on the ranch?
Hayes and Du have not looked at that. “But what the whole industry has done is link the price of corn to its energy value,” said Hayes. “And energy values have increased, so corn prices have increased. Without that link, corn prices wouldn’t be as high. That’s pretty clear to me.
“The negative impact on the livestock industry has been more detrimental than the benefit those livestock farmers get by buying less expensive gasoline. Remember, they’re using gasoline for their personal cars. But tractors run on diesel and diesel, of course, hasn’t been impacted by the availability of ethanol.”
As for ethanol’s future, Hayes believes the country “has probably built the last ethanol plant. I don’t see continued expansion in the industry.
“I do expect corn yields to continue to grow. As corn yields grow, the impact of ethanol on the corn market will be less. Therefore, I wouldn’t expect continued increases in food prices resulting from the use of corn for ethanol.”
Dineen pointed out that the latest USDA figures project “a record corn crop based on what was planted so far this spring and what has emerged. We’re looking at a carryout close to 2 billion bushels.
“I think the American farmer has responded to the challenge and demonstrated he's up to that challenge. And he’ll certainly produce enough corn to meet the feed, food, fiber and fuel needs of the country.”
Dineen said the study would be provided to Congress and the public “to understand just how much a growing and evolving U.S. ethanol industry is benefitting their pocketbooks. Clearly, the 13.5 billion gallons of ethanol used last year had a tremendous impact on reducing gasoline costs and saving consumers at the pump.”