Ethanol producers adapting to drought, record corn prices
As drought conditions continue to impact 2012 crop forecasts and corn prices reach record levels, Nebraska ethanol producers are responding to a changing market.
Like other end users of corn, ethanol producers have significantly reduced consumption in recent weeks.
Latest estimates show the state’s ethanol plants operating at approximately 70 percent of capacity, well below near 100 percent levels in 2011. Nebraska ethanol plants produced more than two billion gallons of ethanol from corn last year.
“This slowing of production is a natural response to drought-related market forces and will not preclude the industry from achieving Renewable Fuel Standard (RFS) benchmarks,” according to Steve Hanson, chairman of the Nebraska Ethanol Board. “Higher than normal ethanol stocks and a large number of existing RIN credits for U.S. refiners combine to make RFS standards achievable well into 2013,” he said.
Hanson also noted waiving the RFS would have little effect on the corn availability, citing a recent study by the Center for Agriculture and Rural Development. That analysis concludes a total waiver of RFS would reduce corn prices by less than five percent and force only a five percent reduction in ethanol production.
“The RFS was created to reduce U.S. petroleum imports and it has done so very effectively,” Hanson said. “In 2011, 14 billion gallons of domestically produced ethanol replaced 13 percent of oil imports and reduced the nation’s trade deficit by $50 billion. For the first time in decades, less than half of U.S. petroleum demand was imported.
In addition, Nebraska motorists saved more than $50 million in fuel costs due to the lower price for ethanol fuels,” he said.
Hanson also noted that the reliable supply of high protein distillers feed produced at Nebraska ethanol plants is an important component of livestock feed supplies in Nebraska.
Nutritionists have noted that wet distiller’s feeds are an excellent supplement to poor quality grass and other roughage used to feed cattle during drought conditions.
“Feed efficiency is essential to livestock producers and the use of distillers feed is a practical way to help accomplish that objective,” Hanson said.
A study conducted by Dr. Ken Lemke, chief economist at NPPD, says 7,700 Nebraskans are employed directly and indirectly as a result of the ethanol industry. State and local governments receive more than $50 million in tax revenues and $250 million is added to household incomes in the state.