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Ethanol: Taking A Look At The Big Picture - Part 1
By Mr Ethanol | November 14, 2007
Farms.com:
For more than 20 years, the members of the National Corn Growers Association, its state affiliates, and non-affiliated corn farmers across the Midwest have made impassioned pleas to Congress, their state lawmakers, and anyone else they could find who might become an ethanol advocate. They won. But the emotions that have run as deep as a subsoil tillage tool are being challenged by a variety of hard economic realities. Will corn-based ethanol survive?
Ethanol has become one of the first successful alternative fuels available for nationwide use, not only displacing 10% of gasoline, but providing EPA mandated oxygenates in the fuel. “But without the large increase in oil and gasoline prices that has taken place since 2002, we would not be experiencing today’s ethanol boom.” That’s the analysis of Bob Hauser, agricultural economist at the University of Illinois, who heads the Agricultural Consumer, and Environmental Economics Department which has just released an extensive economic evaluation of ethanol and its impact on the US. Pointing to the rise in petroleum prices in the past 5 years and the corresponding ethanol production that began about the same time, Hauser says the price of corn, subsidies, trade barriers, and renewable fuel policy have also helped the surge in ethanol use.
Currently 131 ethanol plants are producing 7 billion gallons, and 82 more are in construction that will produce an additional 6.45 billion gallons; all of which would consume 4.8 billion bushels of corn. Hauser’s colleagues “ran the numbers” on ethanol and using $4 corn with a 12% rate of return, they calculated the break even cost for a new plan would be $2.34 per gallon of ethanol, and at $2 corn the break even price declines to $1.62. But the economists say those prices are also dependent upon the values of co-products, governmental subsidies, and the technical abilities of ethanol as a motor fuel. Read the full article here.
Topics: Agriculture, Ethanol, Oil, Prices |
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