Ethanol producers defend their value
Jeff Broin grew up with ethanol. His father built the family's first plant on their farm 20 years ago, when corn prices were a little over a dollar a bushel.
The goal then was to increase the value of corn and its price.
"We think ethanol is the solution to most of the country's problems today and we think a lot of people out there don't want that truth to get out," Broin says.
Today, Broin is the president of Poet, the nation's largest producer of ethanol, based in Sioux Falls.
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Poet operates 22 ethanol plants in seven states and produces more than a billion gallons of ethanol every year.
There are three additional plants under construction and several more in the planning stages. Broin admits the industry is in trouble but he says Poet will continue to grow.
"We didn't ramp up when things were hot like everybody else did and we're not going to ramp down when things are tough," he explains. "We think this is a long term game. We think the world is running out of oil."
Oil prices are setting records nearly every day -a barrel is now at $130. Jeff Broin says big oil wants ethanol out of the picture to keep a greater share of the profit margin.
However, Broin argues rather than driving prices up, ethanol is keeping prices down at the pump.
A recent study by Iowa State University shows that ethanol saves consumers about 20 cents a gallon. Renewable fuel standards require that gas be blended with at least 10 percent ethanol -stretching the amount of petroluem-based gasoline needed to fill a tank.
The demand for ethanol is on the rise, and that's using more corn. The result? Complaints from the food industry.
The Grocery Manufacturers Association blames ethanol for high food prices. Corn and corn syrup is an ingredient in highly-processed foods such as soft drinks, cereals, sauces and hundreds of other products. Corn is also used to feed livestock.
An economist provided by the Grocery Manufacturers Association, Bill Lapp, says consumers will continue to see higher food prices if the demand for ethanol remains.
"It is the dominant force in terms of growth in demand and what is causing us to have growth that's more rapid than we can produce the product," he says.
According to Lapp, it's true there is more demand for food around the world and it does cost more to ship.
He says because of higher fuel prices, food prices would have increased anyway, but not as much. Lapp says a new USDA outlook shows the bulk of grain demand is for ethanol production.
"Three-fourths of that growth in demand comes from ethanol," Lapp says. "So the previous four years, a lot of it had to do with improvement in diet and economic growth. But in the last two years, ethanol is playing a much bigger role in taking grain that otherwise would be used for food."
Lapp says there will need to be a change in U.S. policy to keep food prices from going even higher.
He says those policies can include lowering the requirements to use ethanol and increasing the number of Midwest acres planted in corn.
The ethanol industry is responding to these new economic realities with changes of its own. Some are evident at a Poet plant in Chancellor, S.D.
Construction is underway on a solid waste fuel boiler. It's designed to answer one of the concerns about ethanol production, the claim that it uses more energy than it produces.
Plant Manager Rick Serie says they'll burn wood chips removed from area landfills and methane gas to power this plant.
"Then what we do, is offset rather than buying natural gas. We're supplying our own fuel from a green source whether it's landfill gas or wood chips," Serie says. "It's a renewable source also. So we're proactively getting green fuel to produce green fuel."
Serie says as much as 60 percent of production energy will come from wood or methane gas.
The next chapter in the company's search for more efficient ethanol production?
Rick Serie says they're close to perfecting the use of corn cobs as a source for cellulosic ethanol. That means, fuel from corn cobs, not the corn.
