Field check: Ethanol reshapes the corn market


WASHINGTON – Work is under way to add more than 2 billion gallons to the annual capacity of the U.S. ethanol sector. To meet the sector’s growing demand for corn, some U.S. corn is likely to be diverted from exports.
In the future, corn may cease to be the main feedstock for U.S. ethanol production if cellulosic biomass is successfully developed as an alternative.
Building boom. The year 2005 was marked by a flurry of construction activity in the Nation’s ethanol industry, as ground was broken on dozens of new plants throughout the U.S. Corn Belt and plans were drawn for even more facilities.
As of February 2006, the annual capacity of the U.S. ethanol sector stood at 4.4 billion gallons, and plants under construction or expansion are likely to add another 2.1 billion gallons to this number.
If this trend and the existing and anticipated policy incentives in support of ethanol continue, U.S. ethanol production could reach 7 billion gallons in 2010, 3.3 billion more than the amount produced in 2005, according to the USDA.
Where’s the corn? The tremendous expansion of the ethanol sector raises a key question: Where will ethanol producers get the corn needed to increase their output?
With a corn-to-ethanol conversion rate of 2.7 gallons per bushel (a rate that many state-of-the-art facilities are already surpassing), the U.S. ethanol sector will need 2.6 billion bushels per year by 2010 – 1.2 billion bushels more than it consumed in 2005. That’s a lot of corn, and how the market adapts to this increased demand is likely to be one of the major developments of the early 21st century in U.S. agriculture.
Keep it at home. The most recent USDA Baseline Projections suggest much of the additional corn needed for ethanol production will be diverted from exports. However, if the United States successfully develops cellulosic biomass (wood fibers and crop residue) as an economical alternative feedstock for ethanol production, corn would become one of many crops and plant-based materials used to produce ethanol.
Where will corn come from? Large corn stocks will enable U.S. ethanol production to increase initially without requiring much additional adjustment in the corn market. The U.S. ended the 2004/05 marketing year with stocks of 2.1 billion bushels – enough to produce 5.7 billion gallons of ethanol.
As long as corn is the primary feedstock for ethanol in the U.S., however, sustained increases in ethanol production will eventually require adjustments in the corn market. One possibility is that ethanol producers will secure the additional corn they need by competing with other buyers in the marketplace and bidding up the price of corn.
According to the USDA, much of the increased use by ethanol producers will be diverted from potential exports.
More in the ground? The growing corn demand of ethanol producers could also be satisfied through higher corn output. Rising productivity is likely to assure some increase in U.S. corn production in the years to come, even if the amount of farmland devoted to corn remains constant.
Over the past decade (1996-2005), U.S. corn yields averaged 138 bushels per acre, compared with 115 bushels during the previous decade.
The United States also could increase corn production by devoting more land to the commodity. Such an effort would probably draw upon lands less suited to corn production. Much of these lands would probably be diverted from soybean production.
Growing corn more intensively is yet another approach. For instance, some producers who currently pursue a corn-soybean rotation (planting corn one year and soybeans the next) might shift to a corn-corn-soybean rotation (planting corn two years in a row and then planting soybeans in the third).
Continuous production of corn (planting corn every year on the same plot of land) is another possibility.
Down side. Interestingly, one of the key factors boosting ethanol demand – high oil prices – also makes intensive corn production less attractive because more fertilizer would be needed.
One way to get more ethanol feedstock out of existing levels of corn production is to use the stalk, leaves, and cobs left over after harvest – materials that are formally known as stover. An acre of corn will yield roughly 5,500 dry pounds of stover, enough to produce about 180 gallons of ethanol.
In the United States, corn stover is typically left in the field following harvest to minimize erosion and to contribute organic matter to the soil, so removing some of the stover at harvest might adversely affect the long-term viability of the soil.


Up-to-date agriculture news in your inbox!