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Ethanol business needs E15 to survive -- experts

Jeff Caldwell 05/29/2012 @ 11:03am Agricultural content creator and marketer.

Last year was a big one for the ethanol business. U.S. producers refined just shy of 14 billion gallons of the biofuel and exports grew sharply, capping off a 2-year trend moving from a net importer to a next exporter.

But, despite the boom, there's a figurative wall between today's ethanol business and future growth: The 'blend wall relegating ethanol to either a 10% or 85% blend with gasoline. And, without further expansion of ethanol blending, it could mean an unwinding of the last 2 years' "boom time," experts say.

"The blend wall has important implications for ethanol production and consumption after 2012. In particular, the maximum levels of ethanol blending under current 10 percent blend restrictions may soon be less than the (Renewable Fuels Standard) blending requirements. The requirements for renewable biofuel blending was at 12.6 billion gallons in 2011; is at 13.2 billion gallons this year; and increases to 13.8 billion in 2013, 14.4 billion in 2014 and 15 billion in 2015," say University of Illinois Extension ag economists Scott Irwin and Darrel Good in a university report. "It seems highly likely that the blend wall will be binding in 2013 and this will constrain domestic ethanol consumption to be less than the RFS mandate of 13.8 billion gallons."

This essentially means corn use for ethanol has "reached a plateau" that won't return to a climb until another ethanol blend becomes part of the U.S. automotive complex. This could come in the inclusion of a 15% blend. Without doing so, or taking a similar action, corn demand for domestic ethanol production will likely not go anywhere from its current level.

"Unless the blend wall is expanded much sooner than currently envisioned and/or ethanol exports are larger than anticipated, ethanol production is expected to stabilize near current levels. Usage of corn for ethanol production has therefore also reached a plateau," Irwin and Good say. "Implementation of E15 is crucial to expanding the blend wall and corn consumption in the future. Reaching the blend wall also has important implications for the future of the RFS. The increasing blending requirements for renewable biofuels cannot be met without expanding the blend wall."

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Articled Has Flawed Premise 05/29/2012 @ 3:27pm The premise of this article is that the corn ethanol industry needs E15 to survive. It doesn't. It's already mandated. The author doesn't seem to understand that. Furthermore corn ethanol is definitely a product that the average consumer DOES NOT WANT. The only reason it exists is so that farm state votes can be bought off. If there is too much corn ethanol sloshing around, then maybe the industry will consolidate. Who cares, that is how business works. It's not the governments job to ensure that every corn ethanol outfit that starts up stays in business. Also, if technologies like those being produced by KiOR, Joule and others displace corn ethanol completely, that's great in my mind because it means they can do it cheaper better and without government support. If you are a farmer who built a business around 8 dollar corn its not the taxpayers problem to bail you out. Around here there are tons of farmers paying 50 times cash rent to buy farm ground. I smell a lot of bankruptcies in the future, because these operations are "houses of cards" that were built on the corn ethanol fraud. The author has been reporting to us month after month for a few years how great of an investment farmland is but the tide is turning. What happens when interest rates are 8 percent and corn ethanol demand has been obsoleted by advanced biofuels? That day is coming my friends and I have been diligently saving for it. We could see Illinois/Iowa farmland in the $2-4K per acre range again and that will be the time to buy.

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Jeff Caldwell Re: Re: Articled Has Flawed Premise 05/31/2012 @ 12:28pm Thanks for your comments, Harold! E15 has been approved for production by a handful of companies and for use in certain classes of vehicles, but currently, EPA is conducting a "technical review" before it signs off on general production & usage of the fuel.

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Re: Re: Articled Has Flawed Premise 05/29/2012 @ 3:29pm To clarify, E10 is already mandated. Its not the government's job to create demand for the farmers, especially when the product is something like corn ethanol that nobody wants and produces no net economic or environmental benefits for society.

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