At the end of February, I blogged on a Fortune article that had the subhead "The ethanol boom is running out of gas as corn prices spike." That article noted:
Spurred by an ethanol plant construction binge, corn prices have gone stratospheric, soaring from below $2 a bushel in 2006 to over $5.25 a bushel today. As a result, it's become difficult for ethanol plants to make a healthy profit, even with oil at $100 a barrel.
Just six weeks later, we have an AP article with the subhead "Corn Prices Jump to Record $6 a Bushel, Driving Up Costs for Food, Alternative Energy."
And it gets better worse:
Worldwide demand for corn to feed livestock and to make biofuel is putting enormous pressure on global supply. And with the U.S. expected to plant less corn, the supply shortage will only worsen. The U.S. Department of Agriculture projected that farmers will plant 86 million acres of corn in 2008, an 8 percent drop from last year ...
Another loser in higher corn costs is ethanol producers, who are struggling to squeeze out gains as corn's record-setting run outpaces the price of ethanol, currently at around $2.50 a gallon.
"For years, corn was cheap and fermentation processes for ethanol production came to completely dominate the biofuel industry in North America," Michael Jackson, president and chairman of Vancouver-based ethanol maker Syntec Biofuel, said this week. "Now, with corn prices well over $5 a bushel, corn ethanol economics have gone out the window."
And the worst is yet to come:
The nation's 147 ethanol plants now have the capacity to produce 8.5 billion gallons of fuel a year, according to the Renewable Fuels Association. Corn is the basic feedstock for most of the plants and about 20 percent of last year's 13 billion bushel corn crop was consumed by ethanol production. That percentage is expected to increase to 30 percent for the next crop year, which ends Aug. 31, 2009, according to Terry Francl, a senior economist for the American Farm Bureau Federation.
There are still plans to build or expand another 61 plants, which will add about 5.1 billion gallons of capacity. However, as corn prices have climbed over the past year or so, construction of several plants has been halted or delayed, shaving about 500 million gallons worth of capacity off the original figure, according to Broadpoint Capital analyst Ron Oster.
The 2007 Energy Bill mandate is actually for 15 billion gallons of corn ethanol by the middle of the next decade. Hard to see how corn prices will be coming down any time soon.
This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.
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Comments
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amazingdrx Posted 3:25 am
06 Apr 2008
Meanwhile, enough electricity to take your car as far as a gallon of ethanol/gas does, still costs only 66 cents.
With your own solar panels, after a few years payback in energy bill savings, your daily dose of electric "gas" would be free.
Energy based on fuel sources, biomass, corn, sugar cane, wood chips, whatever will always go up in price with demand.
Energy sources based on renewable resources become essentially free once the device that collects the energy, wind machines, wave machines, solar pV/heat cogeneration; has paid for itself in costly fossil energy saved.
Ethanol in the tank, corn prices soar, people starve.
Plugin hybrids plugged into a renewable smart grid would tend to level off energy prices at around the market price at the average payback period of this energy revolution.
In ten years maybe half the systems needed to replace the status quo energy mess, would be paying off for their owners. Energy inflation could be defeated.
http://amazngdrx.blogharbor.com/blog
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Biodiversivist Posted 4:14 am
06 Apr 2008
This was all predictied (several times in fact) over the years on the Gristmill.
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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katakanadian Posted 10:17 am
06 Apr 2008
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Pangolin Posted 11:11 am
06 Apr 2008
Farmers who probably added an extra year of corn into thier rotation to take advantage of a (possibly) temporary rise in prices have to plant something else for a season or two.
Also with the run up in wheat prices and lack of stock in reserve wheat prices that are now at record highs are not going to go down before a crop can be brought in. Wheat, producing less total calories per acre, getting a larger share of farmland will only increase the price of corn further.
A farmer who can plant half his fields in wheat and half in corn hedges his bets several ways. As long as he brings in a crop he's maximizing income.
Put the Carbon Back
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bigTom Posted 11:51 am
06 Apr 2008
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otocco Posted 12:59 pm
06 Apr 2008
To give you an idea as to how bad the cost of fertilizer has been for farmers, until recently most livestock producers have looked at manure as a "problem" they had to dispose of. Today many livestock farmers are considering expanding. Remember, these guys have to buy that $6 corn and feed it to their animals at a net loss when they go to sell the critters. Why would they be considering expansion in herd numbers? Because of the manure value of the animals. There are folks that have essentially bought future manure production of large confinement operations so they can have the fertilizer to grow that $6 corn.
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cheflovesbeer Posted 12:44 am
07 Apr 2008
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Tasermons Partner Posted 3:45 am
07 Apr 2008
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