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Set the Record Straight on Ethanol in Indiana

Set the Record Straight on Ethanol in Indiana
Don't look for collapse in ethanol demand.

Go to enough coffee shops and you will likely hear a conversation about the future of ethanol. If the crowd in the coffee shop is politically correct, they may even want to talk about support switching from grain ethanol production plants to cellulosic plants. It's part of the food vs. fuel debate. Some believe it's not ethically right to take corn and turn it into ethanol. Yet that's what happens to about 30% of the corn crop year right now.

The politically correct crowd wants to see ethanol made from cellulosic products, including con stocks and cobs, and perhaps new plants, such as miscanthus. The problem there, Mike Boehlje says, is that the transportation problems haven't been worked out. Therefore he doesn't see a big move to cellulose –derived ethanol anytime soon. That's true even though there are incentives to harvest and sell cellulosic feed stock to processing plants in the current farm bill. You can actually get a payment for delivering product to a plant. It's a program called Bcap. The catch 22 is that you must sell to an approved processor, and there are very few processors approved in the Midwest to take delivery of these products.

The better answer, according to Mike Boehlje and Allan Gray, both Purdue University Extension ag economists, is that at least in the short term, we will continue to see use of grain for ethanol production. Ethanol production is not decreasing, contrary to what you may have heard at the coffee shop.

"The rate of growth in the ethanol market that's derived from corn grains is declining, and will probably continue to do so," Gray sees. "But we're not talking about an actual drop in ethanol production itself."

In fact, production will rise until it reaches the 15 billion gallons per year mark required by the government. Then production will likely flatten out at about 15 million gallons per year unless the government raises the allowance on how much ethanol can be produced.

The tax incentive for bio-diesel producers wasn't renewed. Both Purdue ag economists say that could negatively impact the biodiesel industry. In fact, that industry could dry up. However, both expect Congress to eventually reissue some sort of support to ethanol producers once the current program runs out.

The bottom line is that ethanol will continue to be made from corn into the near future, Boehlje says.  

TAGS: Extension
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