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Will gallons per acre be more profitable?

Do we really need an alternative to fossil fuels for our fuel supply in the United States? Here are just a few good reasons the correct box to check for the above question is yes.

  • As the popular screen actor George Clooney said in a recent interview — “at some point we will run out of the stuff (oil),” — that's reality and a real good reason to look for a new source.
  • At one point in 2005 Shell-Mobil was making profits — note profit, not sales — of $3.8 million per hour. That's another good reason.
  • In their respective current forms, emissions from gasoline engines and the Clean Air Act don't match — something will have to give there.
  • Though paying over $3 per gallon for fuel in the summer of 2005 was not outrageous by world standards, doing so in an artificially generated shortage was.
  • A stable price for grain that is high enough for current farmers to stay in business and additional growers to get in the business is a real good reason to develop a renewable alternative to fossil fuels.

I doubt Mobil-Exxon or any other major oil company is exactly shaking in its proverbial boots, but there may be some reason to at least take a quick look over the shoulder.

In 2005, U.S. corn producers provided enough corn for 94 plants in the fledgling ethanol industry in the United States to produce about 4.2 billion gallons, or about 269,000 barrels per day, of high-quality fuel that will do just fine in your Chevy, Ford or Porsche. Ethanol production is fledgling at best, considering U.S. motorists on a good day (for the oil industry) require about 5.5 million gallons.

We don't hear much about ethanol production in my part of the world, but we're about to, thanks to some forward-thinking folks, from the governor's office on down in North Carolina. Production of the first gallon of commercial grade ethanol is expected to flow in early 2006, from a plant near Aurora, N.C. — site for the plant was announced by the governor's office Dec. 13, 2005.

By 2007, the plant is expected to generate 114 million gallons of ethanol per year. Nationwide, ethanol plants are projected to produce 8 billion gallons of fuel per year by the year 2012. If projections run true, ethanol plants would require over 2.5 billion bushels of corn annually, about 20 percent of the U.S. corn crop at current acreages.

Modern technology now allows ethanol conversion from corn at the rate 2.8 gallons per bushel of corn. Add to the 2.8 gallons of fuel, 17 pounds of high-quality cattle feed per bushel, and it's easy to see the price of a bushel of corn going up, or at least remaining stable for some time.

To meet clean air standards, Connecticut, New York and California already require a blend of 8.5 to 10 percent ethanol with gasoline. If the federal Clean Air Act goes through Congress in its current form, each state will have to make similar requirements to comply.

It is equally encouraging, albeit from a public relations standpoint, to note that by 2007 cars racing at the famed Indianapolis International Raceway and at their premier event, The Indy 500, will be fueled entirely by ethanol.

Bob Dineen, president of the Renewable Fuels Association, says, “The science is clear — ethanol-blended fuel does reduce total smog-forming emissions, it is cleaner and safer than gasoline, it is currently less expensive (about $2 per gallon at most Midwest stations), and it does benefit farmers and rural communities.”

Though further back in development, production of biodiesel from soybeans is projected to top a half billion gallons by 2012.

There are probably dozens of economic theories as to why it won't work, but there seems to be an emerging market for U.S. corn and grain that will make those commodities more valuable in the future. I don't have a clue as to what a farmer will make from 42 gallons of fuel and 2,500 pounds of cattle feed from an acre of corn (at 150 bushels per acre), but I am sure optimistic about the opportunities.

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