Ethanol

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Reports and experts are showings trends that the use of commodities such as corn and soybeans are impacting both the economy and the environment in a negative way. Food prices and fuel prices are on a record increase due to the excess demand for bio fuels. As a county we should focus on finding to an alternate source for bio energy.

Historically such commodities as corn and soybeans have typically had a surplus market. Throughout much of the 1980’s one of the largest consumers for these commodities was exporting to other countries, another large consumer was to use it as a supply for feed for livestock. The average price of corn paid to farmers in 1980 was $3.11 per bushel, and in 2005 the average price was $3.50, this was after many years of much lower prices. (Mitchell)

The corn market has been considered a stable market because of the predictable small increases through the years. Today’s current market price for corn is up to about $5.70 a bushel, why the huge jump after 25 plus years of stable prices? Is there a shortage for this precious commodity we know as corn? In the past few year crop productions have been reaching record highs and more farmers are plating Corn than ever before, in 2007 farmers harvested an estimated 85.4 million acres of con, and forecast for 2008 is that farmers will plant even more. (Dougherty) Technology has also helped to increase the total crop production, from the higher yielding hybrid corn plants, to more efficient irrigation methods, and the better equipment, all of these increased crop yields. This does not make sense, if we are producing record amounts of a commodity then the price coloration should be that the excess supply would drive the market value down, but this is not the case for has been happening in the current corn markets.

In the early 1970’s, Ethanol, which is commonly produced from corn, came in to the renewable fuel source scene, as the solution fossil fuel dependency. Ethanol started out as a replacement for the fuel additive Methylyertiarary, As early as 1978, Ethanol was used as an octane booster, and consumers were on the receiving end of a 4 cent per gallon tax credit. During that time period that gas prices were between 80 and 90 cents per gallon, this works out to be about approximately 5% off per gallon. Since the 1970’s and 1980’s ethanol has been researched and developed to be a common additive to gasoline used all across the country.

In today's market ethanol is becoming more popular and more in demand. With all of the current environmental concerns and problems, consumers are asking for more environmentally friendly fuels and less dependency on foreign oils. These demands are driving Ethanol production to record numbers and are doing so at an amazingly fast pace. In 2005 the total amount of ethanol produced was about 3.9 billion gallons per year, which accounted for about only 3% of the total US yearly fuel consumption. Today's market production is up around 8 billion gallons per year, which is still only approximately 5% of the total US yearly fuel consumption (Omaha World Herald). The latest trends indicate that the demand for Ethanol will most likely go up, what are the future predictions for the ethanol market? Is just 5% of the total amount of US fuel consumption coming from a renewable energy source an acceptable amount? Is this 5% enough to end dependency of foreign oils and save the planet?

In the ever growing renewable energy market, people are looking for products like ethanol that are "environmentally friendly " There are advantages to ethanol, it is indeed a renewable energy source, it does burn cleaner than gasoline. Ethanol is fairly easy to produce, although not very efficient, however many companies are finding new products that can utilize the byproducts of ethanol. Producing ethanol also reduces the current reliance on foreign oil even if only by 5%. The production of ethanol does produce less emission than the production of gasoline.

So why don't we increase ethanol production to 50 times more than we are currently producing? Let's take a look at the real cost of producing ethanol, it is estimated that it takes approximately 1 unit of fossil fuel to produce 1.35 units of ethanol. All of the processes considered from planting, harvesting, transportation, and actual production yield only a 35% per unit increase. Ethanol has many other problems as well. One of the major problems with ethanol is the transport of ethanol. Currently gasoline is shipped mainly using underground pipelines. Currently Ethanol cannot be shipped using those same gasoline pipelines, and this is because Ethanol will absorb the water that remains in these pipelines. This water absorption can cause contamination to the fuel, and can become harmful to engines. Ethanol is also less efficient to burn as compared to gasoline. It would take approximately 30% more fuel to travel the same distance using an 85% blend of ethanol, this is commonly referred to as E85, as compared to the same distance using regular gasoline. Another problem is that only certain vehicles can use the E85 blend of fuel. In 2007, it was estimated that of the 237 million cars on the road in the US, only 6 million we capable of using the E85 blend of fuel. Even if there were more cars available to use the E85 fuel, and it was easier to transport it, would it make sense? If 100% of the current US corn crop was to be used strictly for Ethanol production it would supply only 20% of the current on road fuel consumption. (Grundwald)

Production of these amounts of ethanol would have a huge impact on many of the other markets for corn. There would be no corn for export to other countries, no corn to use for livestock feed. There would also be no corn for cereals, tortilla chips, or sweeteners. In fact, it was once best said "To produce ethanol is to take the food out of the hand of the hungry."(Sterling) It is easy to see that there has become a direct relationship between the amount of corn used for ethanol and the lack of corn for other needs. It would appear that there is a problem with using corn for the production of Ethanol, and it is creating a huge excess demand for corn. In a basic economic model it is apparent that as the demand goes up the prices go up. What happens when the cost to manufacture, to produce live stock, to make cereal or sweeteners, and other corn based goods goes up? The costs of these goods are passed on to the end consumer, this means that the cost for food is going up. Based on the coloration between food and ethanol, this means that as the demand for ethanol goes up the cost of food will go up. The USDA reported