Sometimes we’ve just got to be reminded just how much the ethanol industry has improved. The Iowa Renewable Fuels Association recently highlighted the top 10 efficiency and technology improvements in the last decade. 

The first one points to the tremendous gains in corn production:  “In 2001, the U.S. harvested 9.5 billion bushels of corn from 69 million acres, for a yield of 138 bushels per acre.  Ten years later in 2011, 12.4 billion bushels of corn were harvested from 84 million acres, resulting in a 147 bushels-per-acre yield.  This increased corn output has allowed U.S. ethanol production to grow from 1.77 billion gallons in 2001 to 13.9 billion gallons in 2011 while not taking corn away from food, feed, export or industrial uses.”

To make the obvious connection: Note that this year’s crop is suffering from the worst drought in 50-some years, leading to requests for a waiver of the RFS. The basic argument is that ethanol demand is driving the price of corn up and we shouldn’t be using the feed crop in a year with such drought-reduced supplies. 

This week’s USDA supply/demand report projects the crop being harvested now will get a national yield of 122.8 bushels per acre to total 10.73 billion bushels. That’s nearly 2 billion more than a decade earlier. The 2012 crop was seeded on 96.4 million acres and USDA is projecting 87.4 million acres will be harvested for grain this fall.  That’s about an 18 million acre increase in harvested corn acres, much of it occurring on the fringes of the Corn Belt.

That made me curious about other comparisons so I dug up the December 2002 WASDE report and compared a few numbers with the 2012 projections published this week. Feed use in 2002 was 5.6 billion bushels. USDA projects feeders will use 4.15 billion bushels in this marketing year. Ethanol use wasn’t on the radar in 2002, but is projected to be 4.5 billion bushels (which is down from 5 billion bushels used in 2011, the marketing year just ended.)  Roughly one-third of those bushels of corn are being returned to the feed market as distillers grains, so subtract 1.5 billion bushels from ethanol and add it back into to feed. Ethanol is projected to use 3 billion bushels and the feed industry will use be 4.6 billion bushels

Food, seed and industrial use was just 2.2 billion bushels in 2002. Fuel ethanol use was part of that number then, and is now reported separately. But the remaining sectors in that category have grown to using a projected 5.85 billion bushels. I wonder just how much of that is in high fructose corn syrup – the main food use for field corn. Some of the growth, of course, is in the seed needed for that growth in corn acreage, plus corn is now being used in renewable plastics, although I would guess that to be still relatively small.

So, let’s assume ethanol is out of the picture and the acreage devoted to corn is the same as a decade ago—69 million acres. Multiplying that times this year’s yield of 122.8 bushels per acre, we would have a crop of 8.47 million bushels. That would not have been enough to cover the needs of the feed industry (4.6) and the food, seed and industrial users (5.85 million bushels, albeit we should figure out how much of that sector is seed use and subtract that, to be fair).

For those reading this who have no ties to farming, I will also state the obvious to those of us from farm backgrounds. None of the corn we’re talking about here directly becomes food. Sweet corn and popcorn—the forms of corn most people know as the corn that’s eaten—aren’t counted in these numbers at all. Field corn only becomes food after being fed to an animal or going through a wet mill process. Companies like Cargill, Tate and Lyle or ADM split the corn kernel into its fractions, pulling out edible corn oil and other components. They have a choice of what to do with the largest portion, the starch, which can be further processed into high fructose corn syrup, into ethanol or into other chemicals, many of which become bioplastics.  

Yes, the impact on corn prices has been dramatic. USDA reported the national average farm gate price of corn was in a range of $2.20 to $2.60 per bushel in 2002. This year’s projected price range is $7.20 to $8.60. This year’s prices are impacted by the drought. Last year’s may be a better indication of where corn is going to settle at. USDA is reporting 2011 farm gate prices of $6.20 to $6.30.

Corn farmers have seen their costs rise dramatically, too. In the early 80s anhydrous ammonia cost $80 a ton, my retired farmer husband recalls. Corn seldom went over $2 per bushel then. Anhydrous hit a peak of over $1,000 a ton a couple of years ago and is in the neighborhood of $800 a ton now. If there were no ethanol improving corn demand and prices, would farmers be scaling back on corn acreage and planting crops that are cheaper to grow? Certainly, if there were no ethanol, we’d be hearing loud discussions about crop subsidies and the ridiculous policies of paying farmers not to farm. And, the consumer would hardly notice, since the cost of processing, packaging and transporting food is a far greater portion than the portion the farmer gets, which is just 14 cents of the food dollar.