Record production of ethanol boosts Iowa’s
SHELL ROCK — Ethanol plants statewide produced a record amount of fuel last year pumping up Iowa’s economy, according to a report released earlier this week.
Iowa’s 41 ethanol refineries distilled 3.7 billion gallons, up 200,000 from 2010. However, experts say 2012 won’t be as kind to the industry.
Iowa State University issued a report Tuesday, “Estimating the Importance of the Ethanol Industry to the Iowa Economy in 2011.” According to economists and industry experts, the results indicate turning corn into fuel continues to be a boon for the state.
The report says the ethanol industry creates 5,995 jobs statewide, contributes more than $1 billion to Iowa’s gross domestic product and more than $280 million in labor income.
“That’s a lot of money,” said Dave Swenson, an ISU associate scientist and report author. “The labor income to workers, that’s what we care about. Rural areas are otherwise bleeding employment.
“Ethanol has become and continues to be an important presence in rural Iowa,” he continued.
Chad Hart, ISU grain economist, said ethanol plants are a primary buyer of corn. About 40 percent of the nation’s corn crop is turned into fuel.
Competition and demand for corn are keeping corn prices high, and extremely profitable. March corn on the Chicago Board of Trade sold for $6.58 per bushel on Wednesday.
Hart estimates corn would be $2 to $3 per bushel without ethanol.
“We’re talking about ... $1 billion in added can value alone,” Hart said. “That’s huge. It impacts tax receipts, higher land values. We’re definitely seeing a net positive for Iowa.”
Profitability spurred ethanol makers to maximize production and blenders to use it. On average, Hart said blenders made 7 cents per gallon more making E10 —10 percent ethanol and 90 percent gasoline —than selling straight gasoline.
Enthusiasm for 2012 has waned, experts say. Government action and supply and demand will affect profitability of ethanol and possibly production.
A tax credit of 45 cents per gallon for pure ethanol to encourage blenders to use the corn-base fuel expired at the beginning of the year. Hart said that equates to 4.5 cents for a gallon of E10.
Based on current futures prices for ethanol and oil, Hart said blending margins aren’t as rosy as last year. Profits of 2 to 5 cents per gallon are predicted.
“Even with the tax credit gone, it’s still positive,” Hart said.
Reduced profits won’t encourage growth of the industry, Swenson said. A new plant hasn’t been built for years in Iowa, and Swenson doesn’t expect that to change any time soon.
“It’s not enough profit; it’s not the kind of return that gets people excited,” Swenson said.
Ethanol plants churned out 13.8 billion gallons nationwide last year, enough to meet the 13.2 billion-gallon mandate set by the government for 2012.
The Iowa Renewable Fuels Association recently issued a statement praising record ethanol production statewide.
However, the organization says another record isn’t likely without help.
Monte Shaw, executive director of the group, says the domestic E10 market is saturated and usage of more concentrated blends is needed to give the industry a chance to grow.
Much of nation’s gasoline is E10. The IRFA wants E15 —15 percent ethanol and 85 percent gasoline —to be the new standard, though the government has only given the go-ahead to use the higher blend in vehicles made in 2001 or later.
“2011 was certainly a good year for Iowa ethanol producers with increased production and profitability,” Shaw said in a statement. “However, we relied on export markets to grow. We’re also facing the expiration of ethanol’s tax credit. Those factors place a premium on pushing the rapid commercialization of E15.”
There’s no question ethanol has been good to Iowa corn farmers and the state’s economy, said Pam Johnson of Floyd, first vice president of the National Corn Growers Association.
Johnson said trucking firms sprung up to ship corn and distillers grain to and from plants. Ethanol keeps gas prices down and provides jobs, she said.
However, Johnson recognizes high corn prices stifle profitability for livestock farmers. The goal is an acceptable happy medium, she said.
“It’s a big complex picture,” Johnson said. “We care about how all are markets work together.”
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(c)2012 Waterloo-Cedar Falls Courier (Waterloo, Iowa)
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