U.S. group warns ethanol demand will reduce exports of corn
MINNEAPOLIS, Minnesota, US, January 10, 2007 (Refocus Weekly) Increased demand from the ethanol industry could stop the export of half of the corn currently exported from the U.S. midwest.
“Over the last few decades, U.S. farm policy has driven over-production in a few commodities in order to increase exports,” says Mark Muller of the Institute for Agriculture & Trade Policy in ‘Staying Home: How Ethanol Will Change U.S. Corn Exports.’ The paper calls for U.S. farm policy to support domestic markets for corn, rather than foreign markets.
“We are entering a new era where domestic uses are more important drivers of commodity markets,” he explains. Farm policy should “focus on building and diversifying opportunities for renewable fuels and energies, promoting farm practices and cropping systems that build soil health and improve water quality, and ensuring that farmers and rural communities benefit from these new opportunities.”
Projections from the U.S. Department of Agriculture have suggested that demand for ethanol may divert corn from export markets, but the IATP report goes further by warning that up to half of currently exported midwest corn could be redirected to ethanol plants if only one quarter of currently-planned ethanol plants come on-line. Government projections do not consider proposed ethanol plants, resulting in likely underestimations of ethanol's impact on corn markets.
Production of ethanol from corn in the U.S. will double by 2008 if 150 proposed ethanol plants are built, but a continued reliance on corn to meet ethanol demands could be problematic, says co-author Heather Schoonover. “Simply growing more corn may help meet short-term demand, but it raises a number of ecological concerns; the forthcoming Farm Bill should look beyond the near term and encourage the next generation of renewable energies and fuels, which will likely come from cellulosic material in prairie grasses and other cutting edge technologies.”
“There has been little focus on or discussion of the impact of corn-based ethanol on U.S. corn exports but these impacts could be significant, and ethanol’s potential impact on corn exports should cause policymakers to reconsider their long-standing focus on exports,” the report explains. “While ethanol from cellulosic sources looks promising, corn will continue to be the primary source of ethanol in the near future. Given the continued enormous expansion of ethanol capacity, this will result in significant shifts in the corn market.”
Ethanol plants are planned for Iowa, Nebraska, Minnesota, Illinois, Indiana, Wisconsin, Missouri, North Dakota and South Dakota. Corn-based ethanol production in the U.S. doubled between 2001 and 2005, and likely will double again in the next few years, the report predicts.
The U.S. has 100 active ethanol plants which can produce 5 billion gallons a year, and the additional 58 plants under construction or expanding could increase capacity to 9 billion gallons. That level would surpass the Renewable Fuels Standard requirement of 7.5 billion gallons by 2012 ahead of schedule, and the proposed 150 plants would double U.S. capacity by 2008 if they are built.
The Renewable Fuels Standard certainly provided impetus, but the rapid rise in fossil fuel prices, the phase-out of gasoline additive MTBE and subsidies for ethanol production have played a significant role on the rapid expansion of ethanol production, it explains. “Concerns about energy security and climate change and enthusiasm for renewable energy production as a rural economic opportunity also contribute to ethanol’s popularity.”
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