That dread US ethanol policy that reduced foreign oil, saved consumers $800 p.a., and produced more food

August 14, 2014 |

USDAIn Washington, USDA released its August World Agriculture Supply and Demand Estimates (WASDE) report.

The 2014 corn crop is estimated at 14.032 billion bushels. That is 172 million bushels higher than the previous record established in 2013 and new corn yield records are expected to be set in eleven different states. The report estimates 5.075 billion bushels of corn will be used to produce ethanol and its co-products, such as corn oil and distillers grains.

About 3.385 billion bushels will be used to generate ethanol (and the co-product, CO2), while 1.69 billion bushels will be used to generate the DDGs which are returned to farm feed.

Ending stocks are projected to be 1.808 billion bushels, up 7 million bushels from July and the highest level of carryover stocks since 2005. Producer prices for the 2014 corn crop are projected to average $3.55 to $4.25 per bushel.

Some notes of interest

1. Production and yield. In 2005, at the time of the signing of the first Renewable Fuel Standard, corn growers produced 282.2 million metric tons of corn from 74.4 million acres. It works out to a productivity of 139.2 bushels per acre. The industry produced 3.904 billion gallons of ethanol that year, requiring roughly 936 million bushels of corn for ethanol and CO2.

This year, farmers will produce 353.89 million metric tons of corn from 88.2 million acres, which works out to a productivity of 159 bushels per acre. The industry is expected to produce around 14.5 billion gallons of ethanol this year, requiring an additional 2.44 billion bushels of corn for the additional ethanol and CO2.

2. The ethanol bump. The added corn production since 2005 totals out to 71.69 million metric tons, or 2.839 billion bushels, which represents 395 million metric tons more corn for other uses than was available in 2005 — at the outset of the Renewable Fuel Standard.

3. The cost for food customers. Since 2005, the Consumer Price Index for Food has risen 4% relative to the overall Consumer Price Index — or 0.48% per year. That translates into about a $54 investment per family of four, per year.

Meanwhile, according to the Center for Agricultural and Rural Development (CARD), the presence of ethanol in the fuel supply has reduced the cost of gasoline $862.52 for the same family of four.

4. The Bottom Line. If you take the CARD numbers and USDA projections at face value, the US ethanol policy has saved the average US consumer family $808 per year, helped drive productivity gains from farming that have not only displaced some 9 billion gallons of imported petroleum, but resulted in an increase in corn available for the food supply chain.

Reaction from Growth Energy

In response to the recent announcement by the USDA, Tom Buis, CEO of Growth Energy released the following statement: “It is clear from this report that the food versus fuel debate over the U.S. renewable fuel policy can be put to bed.  Our farmers have once again proven we can produce abundant quantities of high quality food, feed, fiber and renewable fuel.

“A 2013 World Bank study has proven that crude oil prices are responsible for 50 percent of the increase in global food prices since 2004. Meanwhile, the restaurant industry is reporting record-breaking profits— $683.4 billion forecasted in 2014, according to the National Restaurant Association (NRA). Additionally, the NRA reported that the restaurant industry has a 47 percent share of the food dollar. The American farmer, however, receives less than $0.18, and of that about three pennies go to corn.

Category: Fuels

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