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Corn+Soybean Digest

Ethanol Industry Under Fire

The ethanol industry has been taking some pretty severe hits lately from the popular news media, some university studies, environmental organizations, food processors, livestock organizations and some political leaders. Some have blamed the rapidly expanding ethanol industry for increased food cost, much higher livestock feed cost, short-term grain shortages, excessive water usage and potential pollution hazards. A recent university study indicated that renewable fuels may actually increase global warming concerns due to more row-crop production and added usage of fertilizer and other crop inputs. While there are questions about the validity of some of the assumptions and data used in the study – and in other anti-ethanol information – regarding new technologies and efficiencies in crop production and ethanol production that are not being accounted for, the fact remains that the strong public support toward the future development of ethanol and other renewable fuels in the U.S. may be starting to decline. This could result in more pressure on Congress and USDA to lower ethanol tax subsidies and to reduce import tariffs on foreign ethanol entering the U.S. A combination of the two would likely slow the development of the ethanol industry in the U.S., and result in a significant increase in U.S. imports of ethanol produced in Brazil and other foreign countries.

Ethanol’s Economic Impact
Not all recent data and information regarding the ethanol industry has been negative. According to a recent economic analysis of the U.S. ethanol industry released by the Renewable Fuels Association, the industry is having a very positive impact on the U.S. economy. According to the report, “Contribution of the Ethanol Industry to the Economy of the United States,” the ethanol industry impacted the U.S. economy in the following ways in 2007:

  • The U.S. ethanol industry helped support the creation of 238,541 new jobs in 2007, including more than 46,000 jobs directly related to the manufacturing and production of ethanol.
  • The ethanol industry added an estimated $47.6 billion to the U.S. gross domestic product (GDP) in 2007, and raised household incomes by $12.3 billion.
  • The tax incentives provided to the ethanol industry in 2007 totaled approximately $3.4 billion. However, the increased federal tax revenues that resulted from the ethanol industry were estimated at $4.6 billion; increased state and local tax revenues in 2007 were approximately $3.6 billion.
  • The 6.5 billion gallons of ethanol produced in 2007 replaced the need for approximately 228 million barrels of imported oil, which at the average value of $72/barrel, had a value of over $16 billion, and has a value of nearly $23 billion at today’s oil prices.
  • The 6.5 billion gallons of ethanol produced in the U.S. in 2007 was an increase of 33% over the total production in 2006, with 23 new ethanol plants starting up during the year, adding over 2 billion gallons to the total U.S. ethanol production capacity.
  • At the end of 2007, 63 new ethanol plants were under construction and eight plants were expanding capacity, which will bring total U.S. ethanol production to approximately 13.3 billion gallons/year, which is more than double the 2007 total ethanol production.
  • The U.S. ethanol industry utilized more than 2.4 billion bushels of corn in 2007, which represents nearly 20% of the available U.S. corn stocks in 2006-2007, and resulted in approximately $8.1 billion of corn purchases from U.S. corn producers.

The ethanol industry is definitely having a very positive impact on the rural economy in many states, including Minnesota and Iowa, and is a positive aspect of the U.S. economy when many other aspects of the Nation’s economy are negative. For more details on the study go to:

Loss of Friend of Agriculture
Recently, the agriculture industry lost a good friend and a person who did and an excellent job of informing the general public about the correct information and facts regarding agriculture production and processing. Bill Callahan, long-time reporter at the Fairmont Sentinel newspaper, who frequently reported on current agriculture issues and wrote feature stories on agriculture, passed away suddenly during late February. He will be missed.

Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected].

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