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USDA Projects Increase in Corn Ethanol Production in 2008 to 9.3 Billion Gallons

12 May 2007

Ethanol08
The projected increase in corn ethanol production for next year will use 27% of the corn crop. Click to enlarge.

The US Department of Agriculture (USDA) anticipates corn ethanol production of 9.3 billion gallons for the crop marketing year 2007/2008, up 58% from the 5.9 billion gallons for the 2006/2007 year. The USDA earlier this year had expected ethanol production for 2007/08 to grow to 8.8 billion gallons.

In this latest estimate, the USDA said that 27% of the 2007/08 corn crop, or 3.4 billion bushels, would be converted into ethanol, up from 20.4% for the current year. The earlier forecast anticipated that 26.5% of the crop would go to ethanol production next year.

The announcement came on the same day as the agency’s release of an analysis of two alternative scenarios of rapidly accelerating biofuels production. One scenario projects corn ethanol production of 15 billion gallons by 2016, the other, more aggressive scenario forecasts production of 20 billion gallons by then. The current USDA baseline forecast anticipates 12 billion gallons of corn ethanol production by 2016.

The 9.3 billion gallons of production now projected for next year is closer to the first scenario, which modeled 9.4 billion gallons, than to the existing baseline forecast with its 8.8 billion gallons.

Under both scenarios, the increase in the quantity of corn used for ethanol leads to a net increase in the total demand for corn and a corresponding increase in price. The higher corn prices causes producers to shift even more land from soybean production to corn, with ripple effects on soil erosion, nutrient loading, crop mix and livestock prices.

Not all of the increase in corn production would come from expansion of plantings.  USDA’s current long-term projections estimate that corn yields will increase from 151 bushels per acre in 2006/07 to 170 bushels per acre by 2016/17.   That change represents a 12.6% increase over 10 years, or almost 1.3% per year.

The report also considers the role of cellulosic ethanol, which, even under the most aggressive scenario, needs to begin rapidly supplying an increasingly large component of the overall ethanol supply if the US is to meet more aggressive renewable fuel supply goals of 35 billion gallons by 2017.

The US Department of Energy (DOE) expects that research, science, and technological developments can reduce the cost of cellulosic ethanol to be competitive with corn ethanol by 2012.  However, it will take time to deploy cellulosic technology through new plant construction and expected retrofitting of existing grain ethanol plants.

The USDA report suggests that corn stover (crop residue) and forest and mill residues are the most likely biomass feedstocks to be used initially.  The abundance of corn acres provides ample supplies of corn stover, and the forestry industry has an infrastructure in place for harvest and collection of woody materials and mills are well established.

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May 12, 2007 in Ethanol | Permalink | Comments (22) | TrackBack (0)

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As the demand for corn increases, price of corn will increase -- and so will price for ethanol.

As refinery processes for creating ethanol from corn improve in efficiency, costs for creating ethanol will fall -- and so will price for ethanol.


So, which affect is stronger over the next 5 billion gallons of ethanol? Increased price due to demand of corn, or decreased price due to economies of scale?

'So, which affect is stronger over the next 5 billion gallons of ethanol? Increased price due to demand of corn, or decreased price due to economies of scale?'

In one sense it doesn't matter. What counts is the price of alternatives. Including imported ethanol.

But it seems clear that production of corn and gains in production efficiency and capacity will all rise rapidly for perhaps five years. And after that the rate of increase will be slow. So my guess is that ethanol costs will go down for a while.

And it is politically impossible to oppose ethanol in Washington and perhaps forty states.

Cellulosic alcohol still seems a tough problem. I expect its volume to be insignificant for five years.

stomy,... price won't fall due to increase in efficiency. The price is only determined by market supply and demand. So even the refinery can make the ethanol at 50 cents / gallon, they can still charge 3 USD gallon as long as people are willing to pay for it.

Corn has risen in price 60% in recent years, I do not expect learning curves nor economies of scale to make up for that. If there is no lower cost substitute for ethanol, then the price will remain high and margins will be acceptable if the price of corn does not double or triple and the next few years.

I think that we should get off corn as a feedstock anyway. E5 nation wide using corn might be acceptable. Using 25% of our corn crop for ethanol may be acceptable, but at some stage it is not acceptable any more. Countries around the world are starting to ask about filling our gas tanks instead of feeding world hunger. We have to find better ways.

One of the main ironies of all this is that if global warming brought on by fossil fuel usage brings climate change that results in reduced crop yields, we will be in quite a bind going down this path.

Mike,
Corn projection link doesn't work

thx.


SJC,
Limitations imposed by corn will force some or all of the following:
a) Change in feedstock, say sweet sorghum, sugar beet, or sweet potatoes.
b) Changes in process, including celluosic ethanol, as well as continued production energy efficiency improvements (seed/planting to wheel EROEI on the larger scale).
c) Changes to other processes, such as gasification or direct biomass to liquid conversion.
d) Expansion to waste material as feedstock (biodegradable garbage, agri and forestry waste).
e) Importation of feedstock, and finished or partially finished fuels.
f) Shift from liquid fuel production (ICE) to electric energy (PHEV/EV).

If the widely held belief that for every 1 gallon of gasoline equivalent requires 0.8 gallons of energy equivalent in diesel and natural gas (for distillation + fertiliser) is correct, then to produce 9.3 billion gallons of ethanol, you'd need 4.65 billion gallons equivalent in diesel & NG.

So you're only really getting just over 1.16 billion gallons (gasoline eqv.) of "new" energy. That's nearly 65kbpd of gasoline.

Buy, hey, that's not half bad.

Andy

Supply and demand don't just apply to the end-product (ethanol) but also the feed stock corn. The massive and sustained increase in the price of corn will result in a large increase on the production of corn moderating and possibly rolling back corn price increases as farmers over-speculate. For example, much of the forested land in the southeast United States not virgin forest, but new growth from fallow land abandoned during the depression due to low food prices. If this land is replanted with corn (or sorghum, etc) it will not take away from food production since it is not producing anything now.

Of course, none of these projections consider the cheap sugar flooding the Western Hemisphere from Cuba once Castro goes away...any day now. This throws all corn price models out the window.


The US Department of Agriculture (USDA) keeps underestimating the actual production of ethanol. There is a simple and fairly accurate way to project production about 24 month ahead.

1) Go to http://www.ethanolrfa.org/industry/locations/ and read the statistics for current ethanol production capacity and the under construction capacity. It is respectively 6,1 billion gallon a year BGY and 6,4 BGY.
2) Assume a conservative plant construction time of 24 months. See http://ethanolproducer.com/article-print.jsp?article_id=2798.
3) Assume linear growth in production (it is more exponential but the error is minimal).

The ultimo 2007 ethanol production capacity is now projected to 6,1+6,4*(7/24) = 8,0 BGY.
Furthermore, the ultimo 2008 ethanol production capacity is now projected to 6,1+6,4*(19/24) = 11,2 BGY. That is, the average ethanol production from primo to ultimo 2008 should be (8+11,2)/2 = 9,6 BGY. This is a little higher than the USDA projection of 9,3 BGY.

It is important to note that it takes a while (about 24 months) before changes in fundamentals changes the actual production of ethanol. I say the three most important drivers of longer term ethanol production are:
1) The price of gasoline. It will move up in the future because of increasing crude oil prices and because of increasing cost of refining the oil. The crude gets heavier each year because of depleting reserves. Crude oil will move up because of increasing world demand, looming peak oil and escalating war in the Middle East.
2) Politics. The current subsidy of 50 cents a gallon could change. I think it will go up because we need a fast replacement for oil imports.
3) Technology and scales of economics. So far rapid progress has been made to lower the production cost and energy consumption of grain ethanol. Future gains will come mainly from cellulosic ethanol. The cellulosic LIBERTY plant from POET with a projected 120 MGY capacity by 2009 and a 83% reduction in fossil fuel is one I will pay attention to for sure (see http://www.poetenergy.com/news/showRelease.asp?id=13&year=&categoryid= ). However, the fact that the US gets an infrastructure will railroads and pipelines, E85 refuelling locations, flex full vehicles, etc is also something that will help bring down the broader long term cost of ethanol. Many other bio-fuels or synthetic fuels may never become important because they lack this infrastructure even if they appear competitive from a narrow point of view. Compressed natural gas is a good example of a very competitive transportation fuel that lacks infrastructure in the US and may never get it.

Cheap corn ethanol is vital for the successful development of commercial cellulosic ethanol because it paves the way for the infrastructure needed to make cellulosic ethanol a long term viable solution to liquid transportation fuels in the US and abroad. That in combination with future PHEVs will end the era of dependence of fossil fuels.

27% of the corn crop to produce ethanol contributes what percentage of liquid fuel needs? Perhaps the article did not state that percentage because it is so pathetic. When is this going to stop? When the majority of consumers are priced out of the food market?

We always are told the "good" news, of course, on inflation. If you take out agriculture and fuel, everything is rosy. If I could take out energy and food, I would be riding high.

I think 25% of the corn crop is like 5% of our fuel needs. So, you could use all the corn and still only get 20% of our fuel. Which shows how "fuelish" this all is :)

One bushel of corn is 56 lb ≈ 25.401 kg and it cost $3,5. Before the ethanol rush it was $2,1. In other words, you could buy all the food you need to be fit for as little as 10*$3,5 = $35 a year! I admit it would be a really boring diet but probably healthier than the average US diet. My point is that nobody will ever starve in the US or elsewhere in the developed world because corn prices are going up. Indeed, the poorest people in the world are mostly farmers and they therefore also stand to gain from this.

Even at $10 a bushel corn would be dirt cheap and people will care much more about the rising cost of transportation fuel than about food prices. This is also the case for most poor people in the developing countries. It is an illusion to think that increasing corn prices is a serious problem.

"Cheap corn ethanol is vital for the successful development of commercial cellulosic ethanol because it paves the way for the infrastructure needed to make cellulosic ethanol a long term viable solution to liquid transportation fuels in the US and abroad."

Well put, Henrik. Nomatter how many good arguments are posted about how corn ethanol is a, "means to and end", too many just refuse to look beyond the present moment.

The current well-to-wheel efficiencies of ethanol are not even close to where we can get them. We know that the current yields for corn can be further improved. We haven't even scratched the surface on using some of the corn stover for ethanol. Improved production techniques and new distribution networks (ethanol can be shipped in pipelines, just not in the current pipelines that are tasked for gasoline) will put a higher percentage of that ethanol into our tanks. Producing engines that can be optimized for ethanol combustion will more than compensate for it's lower energy content versus gasoline (optimized ethanol ICEs have been proven to run with over a 40% thermal efficiency, compared to around 25% for the latest gasoline ICEs).

Once ethanol becomes entrenched as a transportation fuel, and there is a solid business case for continuing to invest in increasing our ethanol refining capacity, it will undoubtedly result in more efficient feedstocks being substituted for corn. If the latest claims are true, switching a portion of the production to butanol will also significantly increase the overal energy yield from our biomass. I haven't even mentioned all of the other "waste" biomass products that go along with cellulosic ethanol/butanol production.

Along with increased fuel efficiencies through improved hybrid technologies (plug-ins and series hybrids) and hopefully, reduced vehicle weights, this approach could absolutely rid ourselves of our fossil fuel addiction.

Furthermore, even if there are huge advances in the hydrogen fuel cell arena, mostly in terms of making transportation and storage more practical, this same feedstock can be used to product hydrogen. There is a lot of promise in the direct sugar to hydrogen production. If claims are true, it is a more efficient route than using ethanol/butanol as the energy carrier, and even the most efficient ICE we could hope to develop would never be as efficient as a fuel cell.

Why sit around hoping for these future efficiencies and cellulosic breakthroughs when current plug-in technology already beats even the most rosy projections of ethanol efficiencies?

Why worry about replacing our ENTIRE PIPELINE INFRASTRUCTURE, when we could just add a few small extensions to our currently existing electric infrastructure to all people to use electric cars (and if you live in suburbia with a garage you wouldn't even need this).

This whole burning food thing just stinks of history repeating itself. It's just starting now, but what happens when times aren't going so well? The Grapes of Wrath, seems pretty apt:

"Burn coffee for fuel in the ships. Burn corn to keep warm, it makes a hot fire. Dump potatoes in the rivers and place guards along the banks to keep the hungry people from fishing them out. Slaughter the pigs and bury them, and let the putrescence drip down into the earth.

There is a crime here that goes beyond denunciation. There is a sorrow here that weeping cannot symbolize. There is a failure here that topples all our success. The fertile earth, the straight tree rows, the sturdy trunks, and the ripe fruit. And children dying of pellagra must die because a profit cannot be taken from an orange. And coroners must fill in the certificates--died of malnutrition--because the food must rot, must be forced to rot.

The people come with nets to fish for potatoes in the river, and the guards hold them back; they come in rattling cars to get the dumped oranges, but the kerosene is sprayed. And they stand still and watch the potatoes float by, listen to the screaming pigs being killed in a ditch and covered with quicklime, watch the mountains of oranges slop down to a putrefying ooze; and in the eyes of the people there is a failure; and in the eyes of the hungry there is a growing wrath. In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage."

Matt when you can buy all the corn you can possible eat in a hole year for less than $35 what is it you worry about? The text you quote is pure fantasy or wishful thinking for those who get a kick out of believing in doomsday.

Rising gas prices will cost you a lot more. We are doing the electric vehicles but even when they are ready in (2-4 years) it will take another 18 years or so before the fleet of vehicles is replaced. Plus most of these electric vehicles will need a range extender that runs on liquid fuel. That will be cheaper than using expensive batteries.

Thank you, Angelo. I would really like to have a web source for the “optimized ethanol ICEs have been proven to run with over a 40% thermal efficiency”. Do you have that?

This may be a good thing. At the moment the US Government pays farmers NOT to grow anything on some of their land. It costs all of us money and produces absolutely nothing. It does support the price as a subsidy but ... at least as far as the farmers I've ever talked to ... they don't like it either.

By using this extra land to grow useful crops we don't need to supply the subsidy, the farmers are more productive, dollars stay in the US Economy etc. From all points it sounds like a win-win proposition. There are other feed stocks which may be much better suited to producing bio-fuels in the future. It will be very interesting to see where we are in 10-20 years. Will we have finally weaned ourselves from foreign oil? Lets hope so!

I used to be opposed to fuel crops, preferring that we use the waste like corn stover instead of corn. But the more I look at switchgrass and other plants grown on land that is now dormant, the more I like it.

We need the structure for cellulose and gasification to move along with cellulose contracts for farmers. Junior just made a speech a few minutes ago. If he was really interested in making a difference he would have gotten on this years ago.

Henrik,

Here is one of the articles I have read on the topic of the increased thermal efficiencies using ethanol and methanol blends: http://www.epa.gov/otaq/presentations/epa-fev-isaf-no55.pdf

One of the conclusions was that blends as low as E30 provide substantial improvements.

Angelo

Why sit around hoping for these future efficiencies and cellulosic breakthroughs when current plug-in technology already beats even the most rosy projections of ethanol efficiencies?

Because plug-in vehicles, unless they are pure BEVs, need liquid fuels too? If anything, PHEVs make the case for ethanol more compelling, since they enable ethanol to displace a larger fraction of the remaining petroleum-derived fuel demand.

Ethajno cannot substitute for more than 15-20% of current liquid fossil fuel demand for transport. Although I know donkeys can't count, the figures are as they are.

The only way that substituting a source for 20% of the present transport demand is of any particular value is if the demand decreases by 80% or so. Fortunately, thanks to Dr Andrew Frank UCD, that does appear to be actually possible and within a few years the second phase of the leading edge of that transport revolution already in progress, will appear with the advent of mass manufactured PHEVs.

I continue to criticize the ridiculous assertion that an erg of energy produced by a current or recently dead plant is any way better or different from an erg of Energy produced by a long dead plant.

Hint: for those left wing know-nothings, only loony Carter could actually distinguish between a barrel or "old" versus "new" oil.

So go on have fun; make ethanol to your hearts content. It can't hurt it will make you feel better if you must "Do Something!" even if its stupid.

But I wouldn't invest my life savings in an ethanol distillery stock.

So says Stan.....

From your very first statement, I must assume you've missed just about every point made on this blog. Every credible approach involves considerably reducing our need for liquid fuels for transport. Ergo, biofuels can provide a higher percentage of that remaining portion, even if there were no other improvements within the supply chain. However, that will not be the case.

Combined with the further advances in using more efficient feedstocks, employing more efficient production and distribution methods, and enabling more efficient combustion within an ICE (ethanol can be burned with a much higher thermal efficiency than gasoline). Oh, and those hybrid technologies that can take another huge bite out of the need for liquid fuels.

Additionally, there is a big difference between what you refer to as "old" and "new" oil. "New" oil is essentially recycling the current carbon from our atmosphere, making it very close to carbon neutral. "Old" oil adds carbon that has already been sequestered to our atmosphere. To make light of that tells the rest of us a lot about your knowledge on the subject.

Are you completely oblivious to the political issues relating to our reliance on foreign oil?

From your statement, I must assume you would consider yourself a "right wing know-everything." Please, enlighten us as to what your grand plan would entail?

For daily updated news on biofuels and ethanol industry, please visit:


http://www.ethanol-news.de

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