Corn is again a low cost feedstock for biofuel

Corn prices are less than half of the price at this time in 2013.

As commodity producers, American farmers are no stranger to the roller coaster ride of prices being offered for their products. The last several years have offered opportunities for profits for corn growers due to low national yields, robust exports and increased domestic demand. American corn growers have risen to the occasion of supplying an increased demand for corn grain. The National Agricultural Statistics Service reports that they have produced over 12 billion bushels of corn in six of the past seven years. Forecasts for this year’s crop are near 14 billion bushels as field conditions have been very good across most of the Corn Belt.

One of the factors in domestic demand has been the use of corn grain for ethanol. This use has grown for several years due to the Renewable Fuel Standard (RFS). The RFS is a mandate requiring fuel suppliers to blend 13 billion gallons of ethanol in 2013 – 10 percent of the gasoline supply. Demand for ethanol made from corn peaked in 2013 due to the blend wall. The strong demand for corn has been a driving factor in the production and price of corn. The impact of corn price has gone from reducing or eliminating profits in ethanol production when prices were high to allowing positive returns now that corn prices have fallen.

The total amount of corn being used for ethanol production in the United Stated is about five billion bushels per year, which is nearly 40 percent of the corn grown. Dried distillers grain is a co-product of ethanol production and amounts to about 30 percent of the corn being delivered to ethanol refineries. This product is used as livestock feed, which offsets the corn that is used for ethanol. Thus, the net use of corn for ethanol is about 3.5 billion bushels per year: 5 billion – 30 percent (1.5 billion) = 3.5 billion.

Closer to home, Michigan farmers have been consistently producing over 300 million bushels of corn per year, of which about one-third is shipped to ethanol refineries. The five ethanol refineries in the state produce over 250 million gallons of ethanol each year and supply over 700,000 tons of dried distillers grain to livestock farms.

American farmers continue to play an important role in offering an alternative to petroleum fuels and creating local economic impacts through the production and use of corn grain and ethanol. Michigan State University Extension continues to offer an unbiased perspective of the biofuel industry to inform citizens on this topic.

Contact Mark Seamon at .(JavaScript must be enabled to view this email address) for more information.