Purdue researcher says US will consume 12 billion gallons of ethanol, produce 13 billion in 2008; return of ethanol glut looms

A Purdue researcher said that the US will produce ethanol at 13 billion gallons a year in 2008, but that the US distribution system could only handle 12 billion gallons, which will cause a fall in prices or an increase in exports.

Researcher Wally Tyner said that building terminal blending capacity, new tanks and new rail lines into the terminals., combined with the slow take-up of E85, would cause the country to go into an ethanol shock that would facilitate the price drop.

Late last year, another report from Purdue projected corn prices in the mid-to-high $4 range for 2008-09, and an addition of 4.5 billion gallons in ethanol capacity in the United States. The combination of circumstances could create disastrous producer margins for US ethanol. The study by researcher Chris Hurt projected a slowdown of plant openings in the second half of 2008, with a final capacity for the year of 13.5 billion gallons.

Production has continued at stable levels since mid-year, with monthly production reaching 556 million gallons in September, up from 527 million gallons in June, according to the Energy Information Administration. Falling demand has created export problems for Brazil as well as a US ethanol glut, despite favorable prices for blenders.

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