Ethanol industry plans to continue its boom

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Published: March 3, 2005

RENO, Nevada Ñ Ethanol production grew 21 percent in the United States last year, moving the industry from bit player to candidate for best supporting role in the fuel business.

“Few industries can match the growth of this one and we believe we’ve just hit second gear,” Larry Schafer, vice-president of the Renewable Fuels Association, told 600 delegates attending the wheat industry’s North American Grain Congress.

The association represents 82 ethanol plants in 20 states that produced 15.5 billion litres of ethanol in 2004, up from 12.7 billion L in 2003.

“In just 20 short years, our industry has become one of the most important players in the search for renewable, homegrown energy resources. Today nearly one in every three gallons of gas sold in the U.S. is blended with ethanol,” said Schafer.

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Minnesota and Hawaii have programs requiring a 10 percent ethanol blend. Montana, Missouri, Wisconsin and California are considering implementing similar legislation. The fuel is also being consumed on a voluntary basis in many states.

In the big picture ethanol is still a small player, comprising only two percent of America’s total market for transportation fuels. But a growing call for energy self-sufficiency has American ethanol promoters drooling over the fuel’s market potential.

Schafer said two-thirds of the world’s known oil reserves are located in the volatile Middle East, and American taxpayers spend $50 billion US a year protecting those supplies.

Oil prices have topped $50 a barrel and all signs point to continued upward pressure on those prices.

By 2010, China is expected to double the number of cars on its roads to 56 million vehicles. The country’s oil demand is expected to double to 11 million barrels a day by 2020, rivaling current U.S. consumption.

“China’s explosion in consumption can’t help but impact oil and gas prices around the world and the United States will certainly not be immune to higher fuel costs,” said Schafer.

Another encouraging development happened late last year when the federal government renewed a tax incentive that pays petroleum companies a rebate of 11 cents per L of ethanol used.

“That has been our bloodline and our lifeline since 1980 and we have extended that through 2010,” said Schafer.

Those are some of the reasons why the ethanol sector is ramping up production. Between the 16 new plants under construction and two major expansions in the works, another 3.4 billion L in annual production capacity will soon be on tap.

Most of the existing and new facilities process corn and sorghum into ethanol. There are only two plants in Kansas using wheat, which is the commodity most western Canadian ethanol proposals have been based on.

Schafer said it is a matter of science. Corn and sorghum are simply better than wheat at capturing starch in their kernels.

But that doesn’t mean wheat-based plants can’t be viable in places where the crop is abundant. Proposals are being developed in Montana, North Dakota and Kansas to build wheat-based ethanol facilities.

Schafer said the ethanol industry consumed 1.3 billion bushels of grain in 2004, injecting $3.1 billion into the farm community. It resulted in an estimated 25-50 cents a bu. increase in nationwide corn and sorghum prices.

American growers are also banking on participating in other potential revenue streams. Forty of the existing 82 plants are farmer-owned, as are 12 of the 16 under construction.

“Farmers grow the crop. Farmers own the companies. And farmers and rural America receive the value of the ethanol industry,” said Schafer.

About the author

Sean Pratt

Sean Pratt

Reporter/Analyst

Sean Pratt has been working at The Western Producer since 1993 after graduating from the University of Regina’s School of Journalism. Sean also has a Bachelor of Commerce degree from the University of Saskatchewan and worked in a bank for a few years before switching careers. Sean primarily writes markets and policy stories about the grain industry and has attended more than 100 conferences over the past three decades. He has received awards from the Canadian Farm Writers Federation, North American Agricultural Journalists and the American Agricultural Editors Association.

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