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Corn+Soybean Digest

Ethanol Insights For The Future

Ethanol may not be growing by leaps and bounds as it has in the past, but demand is still growing, says Mark Schmidt, AgStar Financial Services, Mankato, MN. He adds:

  • New markets for ethanol are opening through investment in infrastructure by blenders and by changes in fuel handling and blending rules.

  • Oil refining margins have been decreasing, which provides additional incentive for alternative revenue in ethanol blending.


    The potential exists for blending much of the new ethanol production over the next 12-24 months.

  • E-85 usage is increasing due to more consumer awareness and availability of more pumps and flex-fuel vehicles.

  • The market will determine what the ethanol price must be in order to balance supply/demand.

Schmidt also says ethanol plant construction costs have risen to between $1.90 and $2.50/gal., depending on the size of the plant. Despite new plant plans being set aside, the supply of ethanol is increasing. According to Schmidt, by Dec. 31, ethanol production is forecast at 8.4 billion gallons per year (bgy), with demand forecast at 7.4 bgy or more. However,demand is actually increasing. Schmidt says it's a reflection of favorable blending economics of ethanol and seasonal gasoline changes.

Rumors and misinformation seem to abound when it comes to alternative energy, particularly ethanol. That said, here are some facts (though not always positive) to keep things straight.

  • Ethanol is transported with trucks and rail. An ethanol pipeline is a great idea, however, a pipeline is expensive to build and to fill as existing fuel pipelines cannot be used for ethanol.

  • Current U.S. corn acreage and yield will support about 15 billion gallons of production per year, while supporting all other corn stock needs.

  • Ethanol has 70% of the btu gas has, causing lower mpg. However, ethanol is also 113 octane, making it a very cheap octane enhancer, says Schmidt.

  • Although most of the ethanol consumed in the U.S. is done through a 10% ethanol blend (E-10) or less, E-85 has great potential for consumers to use even more. However, there are still not enough cars that use E-85, nor are there enough pumps that dispense it (Minnesota has the majority of the pumps in the U.S.). Schmidt says this causes consumers to be unable to “vote with their dollar.”

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