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AMI: New Study Warns U.S. Near Tipping Point In Corn-Based Ethanol
By Mr Ethanol | May 18, 2007
Cattle Network:
A major new study conservatively estimates that increased corn prices driven by rapidly expanding U.S. ethanol production already have increased U.S. retail food prices by $14 billion annually. The study, which was released at a well attended press conference at AMI, was conducted by the Center for Agricultural and Rural Development at Iowa State University, Ames, Iowa. It was funded in part by AMI, Grocery Manufacturers/Food Products Association, National Cattlemen’s Beef Association, National Chicken Council, NGFA, National Pork Producers Council and National Turkey Federation.
The study’s purpose was to provide a realistic assessment of how large the U.S. biofuels sector could become, and to estimate the likely impacts it could have on crop markets, the livestock and poultry sectors, exports, and grain-based wholesale and retail food prices. The study finds that the increase in U.S. retail food prices could reach $20 billion annually under a scenario in which crude oil prices range from $65 to $70 per barrel and U.S. corn prices reach $4.42 per bushel, compared to the $2 per bushel that existed in mid-August 2006.
“We recognize the importance of the United States diversifying its energy sources to enhance energy security,” said J. Patrick Boyle, president and chief executive officer of the American Meat Institute (AMI), one of the study sponsors. “But this study clearly shows that we are reaching a tipping point, and that over-reliance on corn-based ethanol to meet stringent government mandates would further drive up retail food prices, reduce domestic meat and poultry production, and erode our vital meat and grain export markets.”
Under the high-price crude oil scenario, the study projects that U.S. ethanol production could reach 30 billion gallons by 2012, consuming more than half of U.S. corn, wheat and other coarse grain production and triggering higher meat prices for consumers, reduced production across-the-board for all segments of the meat sector, and even greater reductions in grain and meat exports.
The study indicates that corn yield gains would ultimately provide sufficient additional corn stocks to moderate grain price increases if corn-based ethanol production peaks at 14 billion to 15 billion gallons annually by 2010, when existing ethanol plants and those already under construction come online. The study projects that under this scenario, corn prices would peak at about $3.43 per bushel in 2009 before leveling off at $3.16 per bushel by 2016. Ethanol production at that level would equate to approximately 10 percent of U.S. gasoline consumption.
Importantly, the study also finds that cellulosic ethanol likely will not be a panacea to achieving U.S. ethanol-production mandates, meaning the vast majority of ethanol growth for the foreseeable future likely will come from corn. Specifically, the study found that neither corn stover nor switchgrass planting as replacement feedstocks for ethanol makes economic sense on U.S. acres capable of growing corn. It concluded that because of high conversion, handling, logistics and capital costs and constraints, cellulosic ethanol would be viable economically only if the U.S. government funneled approximately $270 per acre in subsidies to entice producers to convert from corn to switchgrass. Read on.
Topics: Ethanol, News, Prices, Research |
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