"Ethanol Fever"

The combination of low corn prices and a good market for ethanol has created a great deal of interest in increased ethanol production. The ethanol market is expanding because of the phase out of the common alternative to ethanol in oxygenated fuels, MTBE. MTBE has been found in groundwater and is being banned in 11 states so far and more will likely follow. This will likely create more demand for ethanol derived from corn, especially on the West Coast and on the East Coast. Some estimates suggest that the use of corn for ethanol will increase from 600 million bushels currently to over 2 billion bushels by 2010. The current national usage of 600 million bushels is roughly equivalent to five to six times the average annual corn grain production in Pennsylvania. Some estimates indicate that for every 100 million bushels of extra corn demand, price increases by 5 cents per bushel, thus the net effect of ethanol production is currently adding about 30 cents per bushel to the corn price.

In many of the traditional ethanol producing states like Illinois, Minnesota and Missouri, many farmer cooperative groups are considering ethanol plant development. This summer NCGA sponsored a conference entitled " So You Want to Build an Ethanol Plant" to educate folks considering the development of plants across the US. ethanol plant in western Ohio. Here in Pennsylvania, we are aware of at least two efforts to conduct feasibility studies for ethanol plants. One proposed plant being considered is a 40 million gallon/year plant (14 million bushels/year) in the York area and another is in western Pennsylvania.

One common question is how could an ethanol plant be profitable in the eastern US where we have a positive basis for corn. Ethanol must be transported to the east coast from Midwest ethanol plants and this cost is estimated to be anywhere from 5 to 15 cents a gallon. According to one source we spoke with, current ethanol supplies come down the Mississippi and out of the Gulf Coast and then on to Philadelphia to be blended with gasoline. If all MTBE use were phased out in the Northeast, this could result in a 600 to 900 million gallon/year market for ethanol. Also, there are also good markets for the co products of ethanol production here: distillers grains for dairy feed and carbon dioxide for bottling plants and other uses. We’ll get more specific information on these issues in the upcoming months as the feasibility studies for various plants are completed.

PMCGA’s role in this issue is to help promote the use of ethanol and to participate in educating our membership and the public on this issue. We have participated in the Ethanol Workshops this summer and some other events as well. We’ll be sure to keep you posted as this issue develops. v

September 2001