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Ethanol Demand Driving Expansion of US Corn Crop; USDA Projects 31% of US Corn for Ethanol in 2016

16 February 2007

Usda07
Projected production and use of corn in the US. Click to enlarge. Source: USDA.

Demand for ethanol will push US corn output to more than 14 billion bushels by 2016, 4.3 billion (30.7%) of which will be used to produce approximately 12 billion gallons of corn-based ethanol, according to the US Department of Agriculture. In 2006, US farmers produced 10.5 billion bushels of corn, 2.15 billion (20.5%) of which went toward ethanol.

In the Agricultural Projections to 2016, the USDA noted that the strong expansion of corn-based ethanol production affects virtually every aspect of the field crops sector, ranging from domestic demand and exports to prices and the allocation of acreage among crops.

The USDA expects overall plantings expand and a higher portion of the total planted to corn. Higher feed costs and the increased availability of distillers grains as a byproduct of ethanol production also affect the livestock sector.

Corn acreage rises sharply in the USDA projections, climbing to 90 million acres by 2010 from 78.6 million acres in 2006 as rapid expansion in ethanol production increases corn demand, prices, and producer returns. As growth in ethanol use stabilizes, the USDA sees annual increases in corn production from yield gains outpacing increases in corn use for ethanol, allowing corn stocks to grow modestly and corn prices to ease somewhat.

Corn-crop expansion will likely lead to fewer soybeans, according to the USDA. In 2006, US soybean farmers produced 3.188 billion bushels. USDA expects that to bottom out at 2.88 billion bushels in 2009.

On the biodiesel front, USDA expects production capacity and output to rise rapidly again in 2007/08. Slower growth is then projected for several years, with biodiesel output leveling off beyond 2010/11 as higher soybean oil prices reduce profitability. At a projected high of 700 million gallons, biodiesel uses about 23% percent of soybean oil production, but accounts for less than 2% of highway diesel fuel use in the United States.

And despite the projected growth in production, even by the end of the projection period, ethanol production (by volume) represents less than 8% of annual gasoline use in the United States. The forecast assumes that cellulosic-based production of renewable fuels will meet the minimum specified in the Energy Policy Act of 2005 of 250 million gallons in 2013 and subsequent years. That does not factor in President Bush’s new call for a more aggressive 35 billion gallon renewable fuel standard by 2017. (Earlier post.)

In testimony before the US Senate Committee on Agriculture, Nutrition and Forestry last week, Ag Secretary Mike Johanns stressed that while corn will have an on-going role in the ethanol industry, cellulosic ethanol is the key to meeting production goals.

We are providing $1.6 billion in new funding in our proposal for renewable energy research development and production targeted at cellulosic ethanol. I am confident in telling you, I think corn will always be a part of our ethanol industry. It’s got a tremendous footing in the market. It’s been around a long time, really successful in the last couple of years. But if we are to meet our goals, if we are to meet that goal that the President talked in his State of the Union of reducing gasoline consumption by 20 percent in ten years, we need to move towards cellulosic.

But here’s the positive thing about that. All of a sudden, ethanol goes from a corn-belt-based program to a national program. If you have biomass in your state, you have forest ground where literally you want to clean up what’s laying on the floor of that forest, you could have a biomass program.

—Sec. Johanns

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February 16, 2007 in Ethanol | Permalink | Comments (30) | TrackBack (0)

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If the $0.54 per gallon ethanol import duty is still in place it will amount to a subsidy approaching $6 billion paid by drivers to giant agribusiness such as Cargill, ADM, etc. Oil companies hardly care, since it takes almost as much petroleum products (including fertilizers) to produce ethanol fuel from corn as the ethanol fuel replaces. This is not a rational energy or air pollution policy, it's welfare for land owners.

Welfare for landowners? That seems a little harsh to me. It is widely known that Ethanol alone can't supplant the U.S.'s annual fuel consumption of 200 billion gallons, but it can put a good dent in it. I would much rather see our farming friends and neighbors make money on corn or biomass for Ethanol than some other foreign country taking our money, spitting on our flag, and funding their terrorist friends.

I really tire of this argument about ethanol's feasablility.
Fact- We will see declining petroleum as we go forward.
Fact- No alternate energy source can compete economically with oil until the price of oil goes over about $100/barrel or more (and stays there).
Fact- If no action is taken now to prepare alternatives to fill the gap, we will be royally screwed trying to do so after the price of oil doubles, or worse, becomes simply unavailable.

Given these, it is important to SUBSIDIZE the ethanol industry to get it up and running while the price of oil inputs are low (for setting up the production plants and related infrastructure, as well as growing and processing the crops). We use corn since it already is subsidized and is hence, the cheapest form of biomass to use in setting up the infrastructure. The actual crop used does not matter right now.

When the oil price DOES go up, the infrastructure will be in place. THEN we'll focus on reducing the amount of oil we use to product the ethanol crop. Such as: using different drops, using more efficient farming methods, and using less gas as individual consumers.

Thanks, darwin, for clearly stating my opinion.

Thanks Darwin, well stated, I hope more people can see that as clearly.

Nicely stated, Darwin.

Darwin: The only "fact" I will question is that of alternatives at <$100/bbl. 1) Cellulosic ethanol, 2) GTL, 3) Bio-Diesel 4) CTL 5) Bio-Butanol 6) Electricity from anything. Granted that some are more advanced than others (GTL on the high end and Butanol and electric on the lower end), but they are all options at under $100/bbl. (Not to mention unconventional oil sources such as bitumen and shale.

Fact - If you took all the arable land in the US and produced only soybeans (for biodiesel) and corn (for ethanol) you could not replace the amount of fuel used for transportation. Without taking into consideration the increase in fuel use for an ICE running on Ethanol (optimized for it or not). In fact, if you just tried to replace ONLY diesel with all the arable land being used for soybeans you would fail and diesel use is much smaller than gasoline use.

Fact - If you took all the arable land in the US and produced only soybeans (for biodiesel) and corn (for ethanol) you could not replace the amount of fuel used for transportation. Without taking into consideration the increase in fuel use for an ICE running on Ethanol (optimized for it or not). In fact, if you just tried to replace ONLY diesel with all the arable land being used for soybeans you would fail and diesel use is much smaller than gasoline use.

It is impossible to know what the actual cost equivalent to oil is for any of these. And the more heavily you rely on any one of them, the more the price for it goes up and then cost more than oil. It will take a combination of all of those to tackle the energy shortage we'll encounter. If any of them were viable at $50/B, we'd already be using it. How ever much one might despise energy companies, they are a business and they seek to make money. I've read that even heavy or sour oil does not make financial sense if sweet crude is less than $50/barrel. Oil shale, bitumen are clearly more costly. The real number is probably only known to the bigwigs in the energy business, and they are waiting to act on it. My guess is that if they act to soon, the oil price drops, there decision becomes costly, and China/India/etc wins with a glut of cheap oil. BUT, if they act too late, there will not be enough supply to build the required infrastructure.
So it's kind of a catch 22, and the right time to act is based on world reserves that are known by whom?

Cellulosic ethanol is not ready for primetime yet despite millions spent in research, so it's price is actually infinite. And if it were ready, it's price is based upon the cost of farming, which is of course heavily affected by the price of oil.

GTL solves nothing. Natural gas will peak soon enough already and coal is the dirtiest, most CO2 emitting way to fuel transportation we can use, and would peak in a generation anyways if it were the primary fuel for transport.

I'm all for renewable electricity and EV's BTW. But unfortunatley, the more you ramp this stuff up, the more the cost of silicon, nickel, lithium, etc goes up. So it's not so easy to set a price equivalent.

All out on ethanol = higher corn price(or whatever crop) = rising cost of ethanol.

All out on solar = higher cost of silicon = rising cost of Solar energy.

All out on EV's = high cost of Lithium and Nickel = rising cost batteries.

It is impossible to know what the actual cost equivalent to oil is for any of these. And the more heavily you rely on any one of them, the more the price for it goes up and then cost more than oil. It will take a combination of all of those to tackle the energy shortage we'll encounter. If any of them were viable at $50/B, we'd already be using it. How ever much one might despise energy companies, they are a business and they seek to make money. I've read that even heavy or sour oil does not make financial sense if sweet crude is less than $50/barrel. Oil shale, bitumen are clearly more costly. The real number is probably only known to the bigwigs in the energy business, and they are waiting to act on it. My guess is that if they act to soon, the oil price drops, there decision becomes costly, and China/India/etc wins with a glut of cheap oil. BUT, if they act too late, there will not be enough supply to build the required infrastructure.
So it's kind of a catch 22, and the right time to act is based on world reserves that are known by whom?

Cellulosic ethanol is not ready for primetime yet despite millions spent in research, so it's price is actually infinite. And if it were ready, it's price is based upon the cost of farming, which is of course heavily affected by the price of oil.

GTL solves nothing. Natural gas will peak soon enough already and coal is the dirtiest, most CO2 emitting way to fuel transportation we can use, and would peak in a generation anyways if it were the primary fuel for transport.

I'm all for renewable electricity and EV's BTW. But unfortunatley, the more you ramp this stuff up, the more the cost of silicon, nickel, lithium, etc goes up. So it's not so easy to set a price equivalent.

All out on ethanol = higher corn price(or whatever crop) = rising cost of ethanol.

All out on solar = higher cost of silicon = rising cost of Solar energy.

All out on EV's = high cost of Lithium and Nickel = rising cost batteries.

I was waiting for someone to make that stupid claim about "all the arabel land would not cover our needs".

Guess what? Our needs our going to change!
You can't base tomorrows energy needs on today's glutinous usage. We don't need to commute so much, we don't need to build more roads (half the traffic will be gone when it's $5/gallon), we don't need to have A-holes driving a hummer to work everyday. For that matter, we don't NEED soccer practice, piano recitals, leisurely sunday drives.

AND ethanol wil only be a portion of the solution. Maybe our fuel will be 1/3 ethanol, mixed with 1/3 shale oil, mixed with 1/3 Coal to liquid fuel. Who the hell knows? But I know we'll have to reduce usage whatever it might be, so stop making that ridiculous argument.

Ethanol from Corn is just the beginning, later it will be obtained from Switchgrass, cornstalks, etc.

Also Butanol is gearing towards production. Ethanol has only 73 % energy content as gasolene while Butanol contains 95 % while the sources and cost of production is the same as Ethanol.

All this means a brighter future for bio-fuels and farmers.

Yes, there are also GTL, CTL coming into picture. Nat-gas will peak only after Oil. The Worlds #2, #3 and #4 oilfields in Kuwait, Mexico & China has officialy peaked and are declining.

Still filling the needs of 3.8 billion Asians is a big question ?.

For that matter, we don't NEED soccer practice, piano recitals, leisurely sunday drives.

Now, here is where I disagree with you. We NEED to be able to relax and do things that make life worth living. And a lot of those do involve using energy in one form or another. Including hauling two kids and all their stuff in an SUV or minivan.

Darwin -- How do you plan on convincing humanity to conserve energy? With the tantalizing prospect of a world without soccer practice, piano recitals or leisurely drives?

Until there is an economic incentive to reduce energy consumption, it will not happen on any appreciable scale.

Yes we do NEED to relax, but that doesn't have to involve a car. What if it cost you a day's worth of salary just to drive the kids to the piano recital? You think maybe we'll discover virtual recitals?

I don't have such a plan to force change. Hell, I need to improve myself first. As you said, until there is an economic incentive...

People will change when forced too, and not a moment earlier. Again, that is why we need to prepare/ramp-up alternatives/subsidize or whatever you want to call it.
We aren't making corn ethanol just to save the farmers, its to save ourselves down the line. Wasn't that what this discussion was about? Why we subsidize corn ethanol, a seemingly pointless exercise in energy production?

Darwin suggests that half the traffic will be gone at $5/gallon. I would suggest that this is not so. In Europe petrol is 5 -7 $ / US gallon and people use cars for "soccer practice" etc.
However, they do use smaller and more efficient cars.
At 5$, nothing much would happen except for a lot of whinging.
At 10$ you might see something, at $20, defintely.
The trick is to allow the price of fuel to increase gradually so people and companies can adopt - if it all happens at once, you could have chaos.
Also, the trick is to get the price up without giving the money to the people who own the crude.
But that is another story.

Well darwin,

Lets do a little math here(1997 census numbers):
~309 million acres of arable land actively harvested.
~3 million acres of arable land lost to development each year. (92 vs 97 data)
~70 million acres for corn, 8.579 billion bushels
~66 million acres for soybeans, 2.504 billion bushels
(CIA fact book)
18.01% of the land mass is arable (407 million acres)

According to the national corn growers association we were getting 149 bushels of corn per acre in 2006(a significant improvement over 1997). So this gives us ~14.9 billion bushels of corn on the unused land without impacting current food production. They estimate 2.8gallons of ethanol from one bushel of corn.

Now we have 41.72 billion gallons of ethanol in a year! Wow, maybe this is bigger than I thought?

We consumed ~138 billion gallons of gasoline in 2003.

So you propose, with an increasing population and decreasing amount of arable land, that we use every last bit of extra acre to produce 30% of gasoline needs?...oh wait, we are going to have to consume 20% more fuel to go the same distance on ethanol. This makes the 41.72 billion gallons equivalent to 33.38 billion gallons or only capable of displacing 24.2% of our gasoline needs.

Oh my, I forgot to account for the extra energy expenditure in cultivating that extra 100 million acres, and then harvesting and refining that corn into ethanol. I better take that into account too...

Hmmm... net energy balance is 6.34 for liquid fuels (actual energy balance is 1.34, but we can always burn more coal to take care of that right? source is eere from the doe) so we are actually producing 35.14 billion gallons of ethanol once the liquid fuels input energy balance is taken into account. Then with the 20% hit on fuel economy you have 28.11 billion gallons of gasoline displaced for 20.4% of the total gasoline consumption. Yet we did nothing about diesel and didn't leave any land for producing soybeans (biodiesel).

Yes, the heat and electricity for running Ethanol refineries will come from Coal.

Even if we go for plugin hybrids power will come from Coal. Its the most abundant source and is available in many countries.

Expect Coal consumption to overtake Oil consumption in few years and the energy prices will actually come down, prompting people to use it even more lavishly.

Among the top-5 energy sources, Oil has 36 % share and Coal has 27 % at the end of 2005.

BTW darwin,

Did you notice that I used favorable numbers for ethanol where I could? 20% hit on mpg using E100 would require engines unable to run on gasoline, I used the corn growers association's numbers (other sources often cited 2.6-2.7 gallons per bushel of corn and 149bushels per acre is much higher than even the 2003 numbers I found off of the USDA website). I took the gasoline usage number from 2003 (less than we use now).

Patrick,

A long time ago in this conversation we already acknowledged that corn based ethanol will not single-handedly replace our current gasoline consumption, allowing us to live lifestyles exactly equivalent to our current ones, with no further changes. We know it won't do that. Continuing to point out emphatically that there is not enough land to grow enough corn to substitute for all current gasoline usage is more or less trolling at this point.

Corn-based ethanol is only an air-quality improver (something we have not spoken about much to this point) and, arguably, a very initial stepping stone to a larger family of renewable fuels and alternative transportation technologies. It isn't going to solve our problems, but at the same time, it isn't going to starve us out of food, single-handedly wipe out the environment, or anything else that significant.

The $0.54 import tariff, by the way, has definitely outlived its usefulness.

Corn-based ethanol boosts evaporative emissions, so it isn't even much of an air-quality improver.

I haven't gone over Patrick's numbers carefully, but I'm sure he's not far off the mark.  Ethanol and biodiesel are both dead ends.  The only solution which lets us continue to drive kids and their stuff to piano recitals is electric propulsion.  As the cost of PV, wind power and batteries keep falling, we'll get there — if something doesn't distrupt the gradual progress first.  That's one reason why I want gas taxes and whatnot to hurry it along.

NBK - Isn't the tariff totally offset by the subsidy? I mean from what I can tell there is 2.5% ad valorem tariff and a $0.54/gallon secondary tariff on ethanol imports. This tariff is then offset by the ethanol subsidy of $0.54/gallon, no? Aren't the tariff and subsidy then a total wash for all imported ethanol and hence the tariff just prevents subsidizing imported ethanol?


Engineer-Poet, biofuels don't have to support the fuel needs of the current fleet in order to be useful. The efficiency increases of EVs or plugins would drastically reduce the need liquid fuels. If EVs, plug ins, whatever can reduce demand by something like 80 percent even current corn-based ethanol technology could deliver a substantial portion of the remaining liquid fuel needs. No technology has to provide the complete answer.

Heck even corn based ethanol can get better: http://www.greencarcongress.com/2006/12/mit_engineered_.html

It is impossible to know what the actual cost equivalent to oil is for any of these.

The study of Wyoming CTL I've been pointing to (that produced diesel at the equivalent of around $40/bbl oil) had estiamted errors of about +-25%. The actual value depends on scale and some assumptions, but the notion that it can't compete until oil hits $100/bbl seems to be ruled out.

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