Ethanol Producers Adapt to Drought, Corn Prices

Ethanol Producers Adapt to Drought, Corn Prices

Nebraska's ethanol plants operating at 70% of capacity, but it may go lower.

As drought conditions continue to affect 2012 crop forecasts and corn prices reach record levels, Nebraska ethanol producers are responding to a changing market. Like other end users of corn, ethanol producers have significantly reduced consumption in recent weeks, says Steve Hanson, chairman of the Nebraska Ethanol Board.

Estimates, as of early August, showed the state's ethanol plants operating at approximately 70% of capacity, well below near 100% levels in 2011. Nebraska ethanol plants produced more than 2 billion gallons of ethanol from corn last year.

Ethanol Producers Adapt to Drought, Corn Prices

"This slowing of production is a natural response to drought-related market forces and will not preclude the industry from achieving federal Renewable Fuel Standard benchmarks," according to Hanson. "Higher than normal ethanol stocks and a large number of existing RIN credits for U.S. refiners combine to make RFS standards achievable well into 2013."

Hanson also claims waiving the RFS would have little effect on the corn availability, citing a recent study by the Center for Agriculture and Rural Development. That analysis concludes a total waiver of RFS would reduce corn prices by less than 5% and force only a 5% reduction in ethanol production.   


"The RFS was created to reduce U.S. petroleum imports and it has done so very effectively," says Hanson.  "In 2011, 14 billion gallons of domestically produced ethanol replaced 13% of oil imports and reduced the nation's trade deficit by $50 billion. For the first time in decades, less than half of U.S. petroleum demand was imported. In addition, Nebraska motorists saved more than $50 million in fuel costs due to the lower price for ethanol fuels." 

Hanson also notes that the supply of high protein distillers feed produced at Nebraska ethanol plants is an important component of livestock feed supplies in Nebraska. Nutritionists have noted that wet distillers grains with solubles is an excellent supplement to poor quality grass and other roughage used to feed cattle during drought conditions. "Feed efficiency is essential to livestock producers and the use of distillers feed is a practical way to help accomplish that objective," Hanson adds.

He also cites the total impacts of the ethanol sector in creating quality jobs and a more diverse tax base in some of Nebraska's smallest communities.

A study conducted by Dr. Ken Lemke, chief economist at the Nebraska Public Power District, says 7,700 Nebraskans are employed directly and indirectly as a result of the ethanol industry. State and local governments receive more than $50 million dollars in tax revenues and $250 million is added to household incomes in the state.

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Established in 1971, the Ethanol Board assists ethanol producers with programs for marketing ethanol and related co-products. The board supports organizations and policies that advocate the increased use of ethanol fuels and administers public information, education and ethanol research projects. It also assists companies and organizations in the development of ethanol production facilities in Nebraska. 

Source: Nebraska Ethanol Board

TAGS: Livestock
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