In the face of dire predictions on the ability of U.S. corn yield to keep pace with ethanol production, ethanol insiders don't deny there will come a point when it is no longer a viable or economical feedstock. In the meantime, there's still room for the industry to flex its muscles and make its presence known in the form of increased production numbers, several industry consultants say.
Realistically, Mark Yancey, vice president of BBI International Project Development, believes that in five or six years the industry will reach that "theoretical maximum" of about 12 billion to 15 billion gallons. Currently, the industry has reached about 4.5 billion gallons to 5 billion gallons of yearly production—with plants under construction bringing the total to about 6 billion gallons.
There's no silver bullet—ethanol included—that will ever make gasoline completely obsolete. "I don't think there is any one thing that is going to replace gasoline," Yancey says. Still, ethanol's potential contribution to kicking America's oil habit is far from insignificant. Based on the highest corn yield recorded, if the entire U.S. corn crop were converted to ethanol, it would add up to almost 31 billion gallons of the renewable fuel, or about 24 percent of current gasoline consumption, Yancey says. Though Yancey clarifies that the entire corn crop would never be gobbled up by ethanol, statistics do show that the renewable fuel has the potential to help this country "kick the oil habit."
In the short term, ethanol producers currently working on building plants aren't that concerned about obtaining enough feedstock, according to Gerald Sherfy, ethanol project manager for Frazier, Barnes & Associates, a consulting company. Those clients aim to get their plants built and lock in a corn supply. The future will probably be a different story, however. "Then it will be a concern for new project developers," he says. "Where are they going to get their corn?"
In the meantime, rising U.S. corn yield trends help to diminish market pressure somewhat, says Scott McDermott of Ascendant Partners, a Greenwood Village, Colo.-based consulting company. Yield trends are rising, on average, 2.16 bushels an acre yearly. While yield trends aren't keeping pace with the fast-growing ethanol demand, if the renewable fuel was able to utilize the entire yearly increase, it could ramp up to about 450 MMgy, McDermott says.
Of course, other markets, such as corn for industrial use and livestock feed, are increasing as well. Still, as distillers grains production increases, that puts livestock feed back onto the market. That could potentially account for another increase of 670 MMgy in ethanol, McDermott says.
With petroleum prices at $70 a barrel, the demand for ethanol is strong, Yancey says. As corn prices rise, it's an incentive for farmers to plant more of the crop. "I think, given time, the crop will expand to meet that demand for ethanol," he says, adding that as production continues to increase, it will have the effect of moderating prices.
Technology is another factor that will help as ethanol production numbers rise, McDermott says. Biotechnology companies are coming out with technologies to help ethanol plants "get the last bit of starch" out of their feedstock.
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