## USDA: Booming US Ethanol Production Could Require Additional 1 Billion Bushels of Corn in 2007-08

##### 11 January 2007

Feeding the boom in ethanol production may require as much as an additional 1 billion bushels of the 2007 US corn crop, said Dr. Keith Collins, Chief Economist for the US Department of Agriculture, in testimony this week before the US Senate Committee on Agriculture, Nutrition and Forestry.

About 2.15 billion bushels of the 2006 corn crop are being used for ethanol production; an additional 1 billion bushels thus would represent an increase of 46.5%. At a current yield trend of 152 bushels of corn per acre, use of an extra 1 billion bushels would require an additional 6.5 million acres of corn, if other uses remain unchanged at current levels, according to Dr. Collins.

In 2000, about 1.6 billion gallons of ethanol were produced in the United States, with ethanol utilizing about 6 percent of the 2000 corn harvest. In 2006, an estimated 5 billion gallons of ethanol were produced, and ethanol accounted for 20 percent of the 2006 corn harvest.

Renewable Fuels Association data indicate there are now 110 ethanol plants with total capacity of 5.4 billion gallons and another 73 ethanol plants under construction and another 8 facilities expanding. When construction and expansion are completed, ethanol capacity in the United States will be 11.4 billion gallons per year, which is likely to occur during 2008-09.

To provide an indication of how rapidly this expansion is occurring, in August 2006, just 6 months ago, the capacity of known plants and those under construction and expansion was 7.4 billion gallons, some 4 billion less than current estimates.

Dr. Collins attributed the skyrocketing production to a number of factors, including:

• High oil prices;
• The 51 cent per gallon tax credit provided to blenders;
• Low corn prices until this fall;
• The ethanol import duty of 54 cents per gallon;
• Improving production economics;
• The Renewable Fuels Standard (RFS); and
• The elimination of ethanol’s main oxygenate competitor, methyl tertiary butyl ether (MTBE).

With more corn moving to more ethanol plants, rising corn prices are signaling a market need for more corn acreage and production.

For 2006/07, USDA forecasts the total use of US corn will be equivalent to the production on 85.6 million acres. Yet, only 78.6 million acres were planted in 2006.

Corn supplies are expected to meet demand because of large carrying stocks of corn, which are expected to be reduced by more than half. During August 2006, prior to the start of the 2006/07 crop year, the average price received by farmers for corn was $2.09 per bushel. By December 2006, after a corn harvest that was slightly below summer expectations and a growing awareness that ethanol production capacity is coming on line at a very rapid rate, US farm-level corn prices averaged$3.01 per bushel, an increase of 44 percent from the August level.

With corn stock levels already being reduced this year, another large drawdown in stocks for the 2007-crop marketing year will not be available to meet the rising demand, thus the higher corn prices that are signaling more planting. Beyond 2007, to achieve steady increases in ethanol production from corn will require ever more acreage or higher corn yields per acre, or both.

The rising prices will encourage planting corn at the expense of soy beans and other crops, with concomitant increases in the prices of the crops facing decreased planting, according to Dr. Collins.

Related issues resulting from the increase in corn acreage include the possible environmental consequences of more nitrogen fertilizer use, and the potential that more marginal lands may come into production having greater vulnerability to erosion, nutrient runoff, and leaching.

Dr. Collins pointed to research as potentially providing productivity gains that could solve some of the acreage challenge.

In fact, virtually all the growth in US agricultural output over the last 50 years is explained by growth in productivity. Growth in inputs used, such as land, has been quite modest.

Since 1948, corn yields have increased four-fold, from 40 bushels per acre to 160 bushels in 2004 due to fertilizers, better management, technology, and improved crop genetics. It appears corn yields in the past couple of years have moved above the long-term trend and may continue to do so in coming years as well, helping to meet biofuel demand and reduce pressure on corn prices and acreage.

Acreage planted to genetically engineered corn varieties has increased from 25 percent of corn acres in 2000 to 61 percent this year. Over the past few years, new generation root worm resistant corn has been introduced and is showing strong yield increases in many areas. Over the next couple of years, drought-tolerant varieties of corn are expected to become commercially available.

As we look out over the next decade, USDA trend projections suggest US corn yields per acre rising to 168 bushels by 2015, however, at least one seed company projects yields that are more than 20 bushels per acre above that level.

Each 5 bushel increase in yield above the current trend level would be the equivalent of adding around 2.5 million acres to corn plantings, enough to produce an additional one billion gallons of ethanol each year.

Dr. Collins, however, expects demand growth for ethanol to slow in several years as a theoretical E10 market—roughly 14 billion gallons of ethanol—reaches its limit. E10 is the practical limit for universal blending of ethanol. Pushing to higher blends would require regulatory approval and changes in engine warranty coverages.

If ethanol is to continue its expansion beyond 10 percent of US gasoline use, higher blend levels and E85 will have to become far more pervasive than they are today, and, given corn production constraints, cellulosic ethanol will have to become economically feasible.

Despite ethanol’s small share of gasoline demand, it already claims a large share of corn production. Ethanol could account for over 25 percent of the 2007 crop of corn, compared with 20 percent for the 2006 crop.

Clearly, developing biofuels from alternative feedstocks will be necessary for long-term expansion of biofuels. Cellulosic ethanol appears to be the best biofuel alternative for reducing crude oil imports, but making it commercially feasible on a wide scale is a formidable challenge.

This is yet another reason why we need to get to cellulose ASAP. The demand for corn is distorting the market and that corn could be used to feed people around the world.

I see it more clearly. We will be able to drive anywhere we want, but have nothing to eat once we get there. Excuse me while I snack on some corn chips and salsa, while I still can......

This is absolute insanity. We would rather have people starve so that we can motor in comfort.

Say goodbye to that Fourth of July corncob for a few years. Geez. This is why I don't like involving politicians. I'd rather have the soybeans for biodiesel.

We grow construction materials on land we could grow food? Are we going to starve because people want wood flooring.

We are going to starve because this nations best farmland is shrinking fast, and it is now going to be increasingly used for ethanol production instead of food. Farming is a very risky venture, at best. The fuel lobby/oil industry is strong, and farmers will sell to whoever pays the most. Our food supply will suffer unless alternatives are found before the ethanol ball gets rolling full steam, with excess ethanol capacity plants, and the need for large amounts of corn to run through them.

Beef will probably be real cheap next year and then expensive after that. It should really improve U.S. diets.

DDG will still be around to feed animals (for meat), unless you gasify it more more fuel.

Not only is farmland shrinking, but the we are depleting the aquifers that the farmers depend upon in order to grow grain.

There are limits to how much DDG you can feed to cattle per day. Perhaps about 20% of the total feed can be DDG.

Not only is farmland shrinking, but the we are depleting the aquifers that the farmers depend upon in order to grow grain.

This and where the water goes afterward are real issues. The food thing is just silly.

Relax its only temporary and we have more then enough corn production capacity to do the job. After that advanced methods will reduce the amount of carn frowth for fuel by using more of the corn plant and switchgrass will start replacing the corn as well opening up all sorts of land not suited to corn. With these and algae production rises we shoud be able to handle 10x the fuel production we are doing now in just a few short years.

For a short time are cheetos might get 10 cents more spendy... bug woop. And yes it does mean for a few years if there is a famine in africa we wont have any excess corn to ship to em.

US is slightly off record corn harvest of 2004 due to less favorable weather. Hopefully it will be different this year.

Due to global warming trend, less droughts and extreme weather events are participated, and productivity of plants are on the rise.

Sizeable increase of agricultural (including corn) yields are attributed to carbon dioxide fertilizing effect, which is luckily on-going. Significant part of this effect is attributed to less moisture perspiration loss, and as a result more corn fields are less rely on artificial irrigation.

GM corn is a wild card offering significant increase in corn yield per acre in years to come.

Use of corn for fuel ethanol production is stabilizing corn prices, which is extremely good thing for American/Canadian farmers and contributes for stable and increased agricultural production. US agricultural export reached 70 billion $in 2004 (in 2004 dollars), and rising. 20% usage of corn for fuel ethanol is the best possible news from the point of view of food security: all of it could be converted over season to feed people, not cars, if something weird will happened. All in all, from 5 to 10% of corn ethanol used to blend in gasoline stock is a good news for everybody, except for comfortably positioned in their arm-chairs dooms-dayers. For everything else there is Master Card. I've said this before on another topic, but the corn industy is a livestock feed production game with a little fuel production skimming off the top. Is is really that much of a problem if 20-30% of production is skimmed off and made into ethanol. Remember you'll still be getting DDG as well to make up for the volumes of animal feed. People on here seem to forget that upwards of 80% of US corn production goes into livestock feed. The rest is human consumption and export. And I'm willing to bet a fairly large portion of the export corn goes straight to livestock feed in other countries. Even if there was no ethanol industry the corn would still be grown and would still consume fertiliser, soil conditioner, etc etc... Andy The point I am making is that food vs biofuel will mean there will always be competition, and that if there should ever be a shortage of anything, it should be in fuels, and not food. Shortages of fuel make us become more conservative, drive less, carpool, ride a bike, or perhaps WALK, etc. Shortages in food are the roots of uncivil society. Everyone should be happy when their belly is full. Empty bellys breed desperation. I may be exagerating, but am trying to set a tone. I hope I am wrong. We may have gone too far already. Butanol would have been of better use than ethanol, but the ethanol lobbyists are much stronger in our governments. Everyone is talking about advanced methods of cellulose ethanol and switch grass, etc. They havent been developed yet, and are years away. We cant just snap our fingers and have them. What if they never work? Its unproven, especially in the high volumes that are being envisioned! Perhaps our cheetos may go up ten cents. How did you get to that number? I agree that our cheetos, or corn chips, will go up, but so will our t-shirts and jeans. Plastics will go up, as will our beers, high fructose corn syrups, drugs, cardboards, papers, packing peanuts, glues, cosmetics, popcorn, soda water, etc. Its all cummulative. We will wake up one day and wonder what happened to the good old days when everything was cheaper. We are on the verge of opening up Pandoras box if we arent carefull. Some restraint, or restriction is in order, in my opinion. As long as there is enough water to keep golf courses green in desert and plains climates (Arizona, Nebraska), and to grow corn for ethanol to fuel those wonderful E85 SUVs at 12 mpg, who cares if there is enough water for the flora and fauna to exist. This is America, dammit, now turn on your television and resume brainwashing, focusing on the things that really matter, like NFL, NASCAR, and PGA. Stop wasting your time thinking about the natural environment and your children's future, corporations and our President will take care of that. You guys are probably going to get really cranky when cellulosic ethanol takes off and nearly every rain forest in the world is cut down to make more fuel. Food shortages in the most obese nation on earth? Oh no! 20% of corn produced going as feedstock for ethanol in 2006 translated into a 44% to 50% increase in corn price. Going from (much too low price) of$2 to about $3 a bushel is barely a fair price to farmers. Existing surpluses are not even fully absorbed. Current surpluses + unused capacity + potential increase in productivity, from 160 to 200 bushel/acre, in USA/Canada can supply much more (2X to 3X) corn for ethanol production but the price will certainly increase with demand. When corn price has reached (a fair price) of$4 to \$5 a barrel, what will be the effect on exports and the price of ethanol and food?

Higher corn price will eventually make cellulosic ethanol/butanol production a commercial reality and reduce the pressure on corn price by 2012/2015.

PHEVs will also play a major role by progressively reducing the total liquid fuel demands for ground transportation by up to 80%.

Don't worry, be happy. There will be enough corn and food in USA/Canada for a long long time. The price may go up for the next 5 years but so will the price of everything else.

Here here. I sure don't see a shortage of food at my local grocery store! Try looking out at the dumpster after a brunch at your local restaurant! Wasted food.

Just the current projected ethanol production will use over 40% of the corn crop. That's a pretty pathetic contribution for such a significant percentage. What will it take to get people's attention. When the entire crop is devoted to ethanol?

I just hope they don't divert my veggie farms to corn.

Well at least we've learned on thing from this boondoggle. Subsidies work.

The low EROEI is the least of it. This program, which will never do that much to actually make a significant difference in our liquid fuel supply, will lull people into the illusion that the problem is solved without any push to increase conservation and reduce our dependency upon the automobile.

In 2006, ethanol's contribution was 5 billion gallons divided by 42 or 119,047,619 barrels. That's equivalent to less than 6 days of oil consumption at 20mbd, not even taking into account lower btu content.

The btu content of ethanol is 62.75% of the btu content of gasoline.

While there are still potential increases in yield, will these be enough to counteract other trends such as increased erosion, salinization, deeper and deeper wells, increased input costs, more nitrogen fertilizer use, and increased drowth. The amount of worldwide grain stocks has been decreasing over the last several years. If the promises of increased productivity are so great, why is the world not keeping up with increased demand due to increased population and increased demand for meat, especially in places like China, which traditionally ate much less meat.

Ethanol is just further feeding the great illusion, that we can continue to find magical ways to satisfy our insatiable demand for liquid fuels to run our oversized automobiles. Subsidizing this monster just gets us further away from the day when we will actually make meaningful efforts to conserve.

It is also feeding the illusion that we are using an alternative fuel that can do anything meaningful to reduce our greenhouse emissions. As long as ethanol, in whatever form, requires fossil fuel inputs, we will continue to warm the planet.

Notice also from this article that increased demand for corn will impact other crops such as soybeans. Not only will we pay more for corn, but we will pay more for other crops.

I was reading that we went from coal to oil to natural gas, but there are no more fossil fuel plays. So, we go to alternate fuels as some sort of manifest destiny. We need to have a systems method that uses supply and demand. Some conservation (less commuting) some efficiency (CAFE) some production (alternative and..yes..drilling) and everything we can to converge to where we want to be. Nothing else can tackle this huge situation in a reasonable time frame.

Poorer nations have had trouble competing against developed countries farm industries.The mass production pushed prices down and farmers could not compete.
Is it possible that diverting quantities to fuel production could provide a market for these heretofore sidelined farmers.I am reading more and more of crops being raised in Africa Asia etc.,to supply biofuels.What about sugar growers in the carribean who have complained about subsidized sugar.Surplus sugar could be used for fuel production and allow the poorer countries to sell their sugar.Their could be solutions to problems here also folks.

Re. starvation
The problem is not that we produced to little agriculture products (neither in the EU, nor in the US). The problem is the oposit. We pay our farmers large subsidies for not using part of their land at all. Just this land is enough for many more years of growth in the ethandol industry.
The pricing problem will solve itself as long as we are prepared to pay more for food than for fuel.
Stefan

Once again the bogus fuel vs food debate is brought up. Land that could have been used for food has been for millenia used to grow fuel for heat and cooking and to 'fuel' draft animals.
People starve for political reasons not because of a lack of food production. The world could have eliminated hunger and other forms of poverty long ago if the rich had the political will to do so.
Only the cultivation of algae for biodiesel has the potential to replace all fossil fuel use. Corn ethanol can only replace a small fraction of fossil fuel use and then only if farmers practice organic methods without irrigation and distilleries only use solar and wind energy.

6.5 million acres at about 640 acres per square mile is about equivelent at 10,000 square miles, or 100 miles on a side. Think of the midwest, this is around 1 % of the plantable land.

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