INDIANAPOLIS, Ind. — The Indiana Corn Marketing Council (ICMC) recently released a study it funded to look into the ethanol industry’s impact on Indiana’s economy last year.
The study, Economic Impact of the Ethanol Industry on Indiana’s Economy in 2014, was carried out by Informa Economics. Ken Parrent, director of biofuels at ICMC, said ethanol production is prospering in the state, which the study seems to reflect. One of the most notable contributions he pointed out was the number of employees the ethanol industry supports.
"The study showed that ethanol production created about 4,000 jobs in 2014, which is a contribution that should not be overlooked," Parrent said. "The net gross state product that ethanol contributed was $934 million, which makes 2014 the best year for ethanol production in Indiana yet."
For every person directly employed by the ethanol industry in Indiana, the study signified seven other jobs were created indirectly. Consequentially, ethanol contributed $315 million in household income last year, including the impact farmers receive from a higher basis. Parrent said farmers received between 10-25 cents more per bushel of corn in 2014.
The study indicated consumers, too, benefited from ethanol’s impact on the economy. Specifically, the report stated: "Lower ethanol prices relative to gasoline at the wholesale level resulted in savings to consumers of $148 million; that is, if this price differential is passed on to retail."
Jerome Dumortier, an economist at Indiana University-Purdue University Indianapolis, said the findings in the 2014 report are accurate but may not reflect the future. "There is no doubt that the ethanol industry has created significant value to Midwestern, i.e. corn-producing, states in the past," he said.
"On a side note, gasoline consumption is expected to decrease in the future at about 0.8 percent per year, according to the 2015 Annual Energy Outlook from Energy Information Administration, which will probably have an effect on the amount of ethanol consumed in the future, given that there is a current blending limit of 10 percent for light-duty vehicles."
In terms of cropland appreciation, the study said Indiana prices increased by an average of $52.50 per acre. It also claimed this increase would result in excess capital gains of $635 million "just due to Indiana’s ethanol industry" if the land were to be sold.
Chris Hurt, a Purdue agricultural economist, said he supports the findings of the report in general, but points out the portion on cropland prices may not be as clear-cut as it insinuates.
"Informa is a reputable firm," he said. "The study conclusions seem reasonably believable; however, it may overextend some of the impacts, such as claiming that ethanol is the reason that farmland prices went up, since there are a host of reasons farmland values have risen in recent years, and ethanol expansion is just one."
In other highlights of the study, it said the impact of the ethanol industry on Indiana includes its net benefit of up to "approximately $65.5 million across all species for livestock feeders able to utilize DDGS (dried distillers grains with solubles) in their feed rations as a lower cost alternative for corn."
It also noted the economic activity generated by the industry, which was $2,881 million in ethanol, DDGS and corn oil sales. This resulted in the generation of $739 million in additional economic activity across other sectors and households in Indiana.
The study covered the industry’s generation of approximately $44 million in state and local taxes and the estimated cost in 2014 for road maintenance from shipping ethanol, DDGS and industrial corn oil, which was approximately $3.93 million.
Parrent said because not all ethanol plants were active that could have been in 2014, Indiana ranks seventh in national production. He said with more ethanol plants in full operation this year, the state could be ranked fifth or sixth in the near future.
He concluded the study can be an invaluable resource for those not directly involved in the industry. "The ICMC is charged with several tasks, and one includes market development," Parrent explained. "We understand how important ethanol is to Indiana, but state officials and others may not, so it is important for us to fund studies like this so the results can be published and shared."
