A recent impact study by University of Nebraska-Lincoln economists shows Nebraska's ethanol production capacity increased by 23% since 2014, and it continues to be a big economic driver for the state.
The study examined the economic impact of Nebraska's ethanol industry between 2015 and 2017. As of 2017, Nebraska's ethanol production capacity was 2.558 billion gallons per year, with 1,453 full-time employees at 24 facilities. That's an annual increase of 481 million gallons and an additional 152 full-time employees compared with 2014.
Jan tenBensel, chairman of the Nebraska Ethanol Board, says these additional jobs reflect the ethanol industry's continued effect on the local job market. In 2016, the total labor income impact — including direct and indirect jobs — was $275 million earned from an estimated 3,509 jobs for average annual earnings of $78,300.
"There are the direct jobs at ethanol plants like grain and ethanol marketers, lab technicians, etc., but there are also the indirect jobs like truck drivers, repairmen, accountants, parts and tool salespeople, and enzyme salespeople," says tenBensel, who farms near Cambridge. "The local community benefits from more patrons at restaurants, hotels and grocery stores."
"Having an ethanol industry in Nebraska has allowed young people to return to rural communities,” he adds. “I have seen this firsthand in Cambridge with young families buying homes and their children attending our rural schools. These additional numbers are so important to help our small towns survive. This is a true economic booster for Main Street."
And higher demand from nearby ethanol plants also affects the local corn market. The study noted a consistently positive effect on local basis (the difference between the local cash price and the futures price) from ethanol production. For example, a producer near an ethanol plant producing 220 bushels of corn per acre would receive an additional $11.44 per acre each year.
"That improved basis provides farmers additional revenue to spend in their community or hire another person to help with harvest or planting," tenBensel says. "That adds up considerably. Especially during an economic downturn, that is very important."
Ninety-four percent of Nebraska's ethanol production is shipped out of state, making Nebraska one of the largest exporters of bioenergy. In addition, 51% of dried distillers grain produced in 2015 and 44% in 2016 was shipped out of state. These out-of-state sales result in a net positive for the state and represent a direct impact by bringing new money into the state economy.
Although ethanol and co-product production increased in 2016 and 2017, prices declined and led to reduced overall production values. Between 2015 and 2017, Nebraska's value of production for ethanol and co-products averaged $3.8 billion.
However, Sarah Caswell, Nebraska Ethanol Board administrator, notes the increased production capacity helps offset the decrease in value — and there is room for additional growth.
"In Nebraska, we have biocampuses popping up all over, where renewable products are co-located next to existing ethanol facilities and utilizing ethanol in their production processes," Caswell says. "The fact that both ethanol capacity and employment increased since 2014 indicates a positive long-term outlook for the industry, and ethanol plants continue to assimilate technology that improves efficiency and diversifies their production portfolio."
This includes fixing current bottlenecks and new ethanol co-products coming down the line — such as biopharmaceuticals and custom-feed options for cattle.
"You need other market factors as well — like strong public policy support and regulations to help drive that growth," Caswell adds. "We're hoping the EPA implements a final RVP [Reid Vapor Pressure] rule by May 31 to allow for year-round sale of E15 throughout the country, which will help increase demand for E15 and perpetuate this growth we're seeing."
And, tenBensel encourages corn growers to not only use higher ethanol blends themselves but request it from retailers. "We've got to use our product and ask for our product," he says. "I would like to see Nebraska get up to 11% by volume of usage for ethanol. We're up to 10.2% from last year. That would put us above the so-called 'blend wall' of 10%.'"
Authors of the study include Kathleen Brooks, UNL agricultural economics professor; Tim Meyer, UNL agricultural economics professor; Eric Thompson, UNL economics professor and Bureau of Business Research director; and Cory Walters, UNL agricultural economics professor.
The purpose of the "Economic Impacts of the Nebraska Ethanol and Ethanol Co-Products Industry" study was to estimate the value of production during 2015-17 as an update to a 2014 study and compare that value with major commodity production values in Nebraska.
The study also measured productive capacity, co-product value, employment, net returns, in-state use and exports. To view the full study, visit agecon.unl.edu/ethanolimpacts.