Corn farmers depend on growing ethanol production

Source: By Janelle Atyeo, • Posted: Thursday, April 26, 2018

Midwestern corn farmers, with their ever increasing yields, are dependent on the growth of ethanol production as a market for their crop, and while newly announced national and international policies bode well for the industry, agricultural groups say bioenergy needs more support in Washington to keep farmers successful.

This month, Japan announced it will take imports of a gasoline additive made from corn ethanol. It’s the first time corn-based ethanol has been made available to the country, which previously allowed only ethanol made from sugarcane.

The announcement came on the heels of a promise from President Donald Trump to support year-round sales of e15 ethanol at the pump. Currently, e15 is recommended only for non-flex-fuel engines during summer months when some high octane fuels evaporate. Other vehicles are allowed to use e15 blends in the colder months, but a policy shift could allow other unleaded fuel engines to run e15 year-round. E15 is currently approved for use in light duty vehicles made after 2000.

The U.S. makes about 58 percent of the world’s ethanol, according to the Renewable Fuels Association, so selling to other countries is one way to grow the market. Making fuel with higher ethanol blends is another. While almost all U.S. gasoline is blended with 10 percent ethanol, advocacy groups are working to lift restrictions on higher blends such as e15 and e30. These new policies could be the next boost that Midwestern ethanol plants need to grow.

Ethanol production has plateaued in the last decade as plants produced enough to meet the need for 10 percent ethanol blends. Ethanol industry backers and farmers alike hope for strong ethanol use to support their markets.

Chester, South Dakota, farmer Ron Alverson sees many benefits of ethanol. He attributes the strength of farms and rural communities to ethanol production.

Alverson was a supporter of ethanol production from early on. He’s an investor in the state’s first farmer-owned ethanol plant, Dakota Ethanol, located north of his farm in Wentworth, South Dakota. He watched the industry take off around 2000.

The early 2000s brought rapid growth as oil prices soared. Ethanol production grew as oil prices rose and Americans looked for a way to stretch their supplies of gasoline. Ethanol was a renewable, American made option and a clean-burning fuel.

State programs helped ethanol along. In Minnesota, the state helped fund plants.

“That really got the ball going,” Alverson said. Soon South Dakota caught on. “They saw the success of that program and the wealth that was being created in those communities.”

South Dakota put in a smaller incentive, but it was helpful, Alverson said. Plants went up near Milbank and Watertown in northeastern South Dakota and at Chancellor in the southeast.

“It was just one after the other then for four or five years,” Alverson said.

The boom was good for rural communities as ethanol companies built plants and hired local workers. It was also good for farmers, and corn prices started to climb.

The price of corn climbed to nearly $7 per bushel within the decade, and land prices increased with it. Now that production has caught up with the demand for ethanol, corn prices have gone down. With large supplies of corn today, prices are back down to about the cost of production.

Without ethanol, corn growers would be hurting much more, Alverson said.

“In the end, it created a lot of wealth. It gave us a new market for our corn,” he said. “It’s had a huge positive impact.”

Today, South Dakota ranks sixth for its ethanol production capacity. Fifteen plants across eastern South Dakota produce just more than 1 billion gallons per year, according to the U.S. Energy Information Administration. Another ethanol plant is under construction in Onida, which will be the westernmost plant in the state.

Iowa leads the nation with the ability to produce 4 billion gallons of ethanol per year, according to the U.S. Energy Information Administration’s 2017 figures. That’s followed by Nebraska, Illinois, Minnesota, Indiana and South Dakota.

Poet is one of the largest ethanol producers in the world, and it opened its first plant 31 years ago in Scotland, South Dakota. Poet now has 28 plants, including one in northwestern Iowa that uses cellulosic material such as corn stalks to make fuel. Today, Poet has six plants in South Dakota and its company headquarters in Sioux Falls.

“Biofuels and agriculture are tied together in a way that they can’t really ever unravel,” said Matt Merritt, a spokesman for Poet.

He’s pleased that the president is willing to update regulations like the one that has been holding back e15 use, and it’s good for agriculture.

“Biofuels are the growth market for agriculture,” Merritt said.

With corn yields up and stores of corn increasing, turning the grain into biofuels is a way to add value to the commodity, he pointed out.

“If we’re going to help farmers recover and turn our fortunes around here in the Midwest, it’s going to have to be done as a value added commodity,” he said.

That’s where exports can greatly help the market.

Alverson agrees, and he advocates for open trade and lifting restrictions on ethanol blends. He hopes drivers will be able to use more e15 and e30 gasoline because it means a demand for more ethanol and more corn.

“We hope to have incremental growth and keep growing our industry,” Alverson said. “Because obviously we can produce a lot of corn.”

Reach Tri-State Neighbor Editor Janelle Atyeo at 605-335-7300, email or follow on Twitter @JLNeighbor.