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Ethanol production rising; demand outpacing supply

Ethanol may be losing some of its luster as a renewable fuel — in part because of media attacks purporting to portray the dark side of the alternative fuel’s impact on food prices. But the U.S. ethanol industry produced 32 percent more of the corn-based fuel in 2007 than in 2006, according to year-end data recently released by the U.S. Energy Department’s Energy Information Administration.

Capacity for ethanol production is expected to grow another 4 billion gallons in 2008, despite shrinking margins for ethanol from higher-priced corn feedstocks, according to the Renewable Fuels Association.

The numbers were spelled out in a news release from the National Corn Growers Association, which hailed the increase as great news for U.S. corn growers who have seen corn prices rise from $2 per bushel to nearly $6 per bushel due, in part, to the rising demand for ethanol.

“We’re excited to see such growth in the production of ethanol and to see the expansion of the industry’s overall production capacity,” said Steve Ruh, chairman of NCGA’s ethanol committee and a grower from Sugar Grove, Ill.

“There are so many benefits to producing and using corn ethanol, whether it is greenhouse gas reduction, energy security or important co-products such as distillers dry grains. Our growers are committed to working with the ethanol industry in promoting these benefits and providing valuable goods to the nation’s consumers.”

NCGA officials have also been responding to a growing number of media articles and broadcast criticizing ethanol demand for leading to higher food prices. Often, the prices cited are for food products that have nothing to do with corn prices.

“I am sick and tired of hearing these so-called experts criticize ethanol for everything from higher food prices in Africa to $5 popcorn in movie theaters,” said a Missouri delegate to the NCGA’s Corn Congress at the Commodity Classic in Nashville, Tenn.

In its December monthly oxygenate report, released March 3, the Energy Information Administration said U.S. ethanol production averaged 423,000 barrels per day, for a total of 6.48 billion gallons for the year. This is an increase of 108,000 barrels per day over 2006.

Further, according to the EIA, ethanol demand averaged 446,000 barrels per day in 2007, or 6.84 billion gallons of demand for the year. That is an increase of more than 1.5 billion gallons over 2006 demand.

Looking ahead, the organization sees room for increased production to meet the requirements of an expanded renewable fuels standard. Current ethanol plant capacity is 7.88 billion gallons, with another 5.54 billion gallons of capacity under construction. The completion of these projects would bring ethanol production capacity to nearly 13.5 billion gallons.

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