Iowa Public Television


Ethanol Industry Booming

posted on November 10, 2006

The ripple effect of the growing economic power of biofuels, especially corn-based ethanol, is starting to reveal.

For one thing, the Chicago Board of Trade announced this week that it has plans to establish clearing services for two new ethanol contracts. Second, studies indicate job growth in ethanol and its related industries continues.

Those matters -- job growth and speculative investment -- point to significant changes in the nation's fuel economy ... some not-so-subtle shifts that impact the way that business gets done in farm country and beyond.

Ethanol Industry Booming The price for corn has jumped more than 50 percent since mid-September, when U.S. farmers began harvesting their third-largest corn crop ever. Often, grain prices decline during the harvest season, but the price of corn in recent weeks has shot to the $3-a-bushel mark and appears to be headed higher.

According to Keith Collins, chief economist for the U.S. Agriculture Department, the higher benchmark for corn represents a shift in the balance of power in the farm sector. The booming ethanol-fuel industry likely will have an impact on everyone from consumers and food processors to farmers.

A new study from the Center for Agricultural and Rural Development claims if the ethanol industry grows to account for 20 percent of U.S. fuel use --nearly 32 billion gallons by 2015, then some segments of the agriculture community could be left out. Some livestock farmers are concerned the corn rally will increase feed costs. Global food producers are worried they won't benefit any more from an abundant and cheap supply of ingredients made from U.S. crops like corn, like they have for more than a decade. And, those involved in the packaged food industries say they already are coping with sharp increases in wheat and sugar costs this year.

There currently are 106 ethanol plants operating in the U.S. and an additional 48 plants are under construction, according to Renewable Fuels Association. And USDA predicts the ethanol industry will consume 2.15 billion bushels of this year's corn crop. This represents 20 percent of the total U.S. corn harvest.

Meanwhile, the price of gasoline this week fell to its lowest level in more than 10 months. People are paying 17.6 cents less a gallon at the pump than a year ago, and more than 80 cents less since the start of August.

Tags: agriculture biofuels corn crops ethanol industry news renewable fuels