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Corn+Soybean Digest

SDSU Research Examines Dependency On Ethanol Industry

Ethanol production used less than 5% of the nation’s corn in 1990-1991, or 333 million bushels, but used as much as 24% – 3.1 billion bushels – by 2007-2008, a South Dakota State University (SDSU) economist says.

SDSU Research Associate Yonas Hamda’s article, “Dependency on the Ethanol Industry,” is included in a recent issue of the SDSU Economics Commentator. It’s available online at an SDSU department of economics Web site, www.econ.sdstate.edu.

Hamda includes some discussion of domestic corn used for ethanol. The figures show that the top five states in ethanol production – Iowa, Nebraska, Illinois, South Dakota and Minnesota currently account for two-thirds of ethanol production capacity – are channeling a substantial share of their corn into ethanol processing.

About 60% of South Dakota’s corn went into ethanol production by 2007-2008, the highest proportion of any state. In Iowa the figure was 50%; in Nebraska, 40%; and in Minnesota and Illinois, 30%.

The increasing rate of corn for ethanol use has affected the availability of corn for feed and exports. Research in 2008 by SDSU Economists Bashir Qasmi, Hamda and Scott Fausti suggested the share of corn going for ethanol production implies a heightened level of dependency of South Dakota’s agricultural economy on the industry.

In South Dakota 15 ethanol plants have the capacity to produce 874 million gallons/year – 9% of the nation’s ethanol producing capacity. The study by Qasmi, Hamda and Fausti found that three companies –VeraSun Energy, Poet and Archer Daniels Midland Co. – owned 43 plants in the U.S., with total capacity of 3.6 billion gallons/year, accounting for 36% of the nation’s ethanol production capacity in 2008. VeraSun filed for Chapter 11 bankruptcy in 2008.

As of September 2008, there were 165 ethanol plants in the U.S. with a total capacity of 9.9 billion gallons/year. National ethanol production is expected to soon reach 13.8 billion gallons/year due to expansion at five plants and construction of 34 new plants.

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