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Ethanol has long tail to wag 2007
In 2006, ethanol was the strong tail wagging the farm dog. In 2007, ethanol will be the big, well-muscled dog whose price-pumping tail will stir every farm market and nearly every public policy debate.

Ethanol’s growing numbers prove it. In the current 2006/07 marketing year, 107 ethanol plants, capable of producing 5.1 billion gallons of biofuel, will cook through 2.1 billion bu. of corn, up from 1.3 billion bu. just two years ago.

Calendar year 2007, however, should bring many of the 50 now-under-construction ethanol plants on-line. Eight currently being expanded plants will kick even more product onto the market. The combined new capacity is a mind-boggling 3.8 billion gals.

That means a year or two from now, the U.S. ethanol industry will be capable of pouring an additional 9 billion gals. into the American fuel market, or 1.5 billion gals. more - and four years in advance - of the 2012 Renewable Fuel Standard of 7.5 billion gals. OK’d by Congress in 2005.

It also means that ethanol makers will chew through 3 billion bu. or so of corn next year, nearly twice as much as just three years ago. And none of these numbers include the more 150 planned plants, with another 10 billion gals. capacity, on drawing boards across the U.S. Iowa alone is home to at least 20 announced, not-yet-built plants whose combined capacity, 2.2 billion gals., equals the ethanol produced nationwide in 2001.

The wake churned by this titanic ship will be massive, explains a Dec. 12 Institute for Agriculture and Trade Policy report.

For example, figures the IATP, if only one-half of the not-yet-built plants come online in the near future, 2008 corn exports from the Midwest - corn moved from the Midwest to other U.S. and foreign markets - will drop by 63 percent, from 2.75 billion bu. to 749 million bu.

Should all of the announced, not-yet-built plants be constructed, IATP reckons the historical trend of Midwest corn exports will be stood on its head: the Midwest will be importing corn from the rest of the U.S.

According to IATP numbers, the biofuel boom - if fulfilled - will require Iowa to import 200 million bu. of corn, rather than export 670 million bu. as it did in 2005/06. Nebraska would need even more, 421 million bu., to fill its ethanol-made hole.

While it’s impossible to predict what share of the announced plants will be built, the fact that every week brings even more new plant announcements will push agbiz and Congress to re-evaluate every current corporate and federal approach to agriculture.

Should America’s nearly sacred, export-based farm policy be dumped in favor a domestically directed, energy-based 2007 Farm Bill? After all, corn used to make ethanol will, at 2.1 billion bu. in the 2006/07 marketing year, nearly equal corn exports, a USDA-estimated 2.2 billion bu.

Incoming House Ag Committee Chairman Collin Peterson carefully dipped his toe into that swamp recently when he suggested a five-million-acre “biomass” reserve as part of upcoming legislation.

But five million acres, planted to corn and yielding the national average 140-bu.-per acre, boosts U.S. production by only 700 million bu., or about half the corn necessary to feed the being-built and now-expanding plants. Where will the other half, as well as the still-on-paper plants, get theirs?

And what about energy policy?

Many of the newer ethanol plants will be coal-fired. Will the more environmentally-friendly Democratic Congress embrace a dirtier, domestic fuel to enhance a newer, somewhat cleaner fuel? Would you?

Indeed, booming ethanol production raises an almost endless string of policy choices from water to trade to transportation to taxes. Making the correct choices will be 2007’s biggest job.

This farm news was published in the Jan. 3, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.