Ethanol advocates work to boost demand

Source: By Nat Williams, Missouri Farmer Today • Posted: Tuesday, April 11, 2017

ST. CHARLES, Mo. — The renewable fuels industry is trying to avoid becoming a victim of its own success.

Ethanol production is at record levels, but limits to demand require an expanding market. That includes higher levels of biofuels in gasoline, more use of byproducts and increased export opportunities. Barry Frazier is well aware of the challenges.

“Any successful industry needs growth potential,” said Frazier, president of Center Ethanol, which operates a Sauget, Ill., plant that produces more than 50 million gallons of ethanol annually.

Frazier was among biofuels advocates speaking at a conference of the National Postsecondary Agricultural Student Organization here. More than 500 college students and ag professionals were on hand.

The United States produced more than 15 billion gallons of biofuels in 2016, a record. About 200 facilities are producing ethanol, mainly from corn.

“The U.S. ethanol industry has gone through a dramatic expansion in the last decade,” said Kelly Davis of the Renewable Fuels Association.

The industry has been successful in working with government to increase ethanol use, largely through the federal Renewable Fuel Standard, which mandates biofuels inclusion in energy production. The mandates are extended through 2022.

Davis pointed out that doesn’t mean mandates will go away in five years. And she is among those working to convince the automobile industry to be more receptive.

“The Renewable Fuel Standard does not end in 2022. The EPA at that point takes over the program and dictates the volume,” she said. “We believe ethanol’s future relies on octane.”

Adding octane to a gasoline-ethanol mix is one means of increasing demand. The key is reaching for higher percentages of ethanol — 15 percent and more — in more cars and gas stations.

“If we build cars that are tailored to run this higher octane, we can achieve better miles per gallon on the same fuels,” Davis said. “We’re spending a lot of time working with Detroit.”

Center Ethanol began construction of its plant just across the Mississippi River from St. Louis in 2008. Things have been moving quickly ever since.

“We built the plant there in the boom time of ethanol buildout,” Frazier said. “During that period of time, the ethanol industry grew too fast. In terms of capacity of ethanol production, we blew through demand.”

Biofuels serve as an economic regulator across the agriculture and energy industries, he said.

“This country produces way more grain than we can consume. We also consume more oil than we produce,” Frazier said. “Biofuels — not completely, but to some extent — act as a balancing mechanism.”

Belleville, Ill., corn producer Greg Guenther said future growth of ethanol may partly depend on corn hybrid technology.

“It’s going to be market driven. Illinois corn growers are drawing circles around ethanol plants and saying farmers need to go to high-starch corn,” he said. “That hasn’t really happened. There was talk about premiums. It didn’t quite work out that way. As the industry becomes more efficient and able to differentiate different types of corn, the farming community will respond to those needs.”

Exports also play a role in the market for ethanol and its byproducts, especially dried distillers grains. According to Davis, the United States exported more than 1 billion gallons of ethanol in 2016.

“Driven by increased global demand, U.S. ethanol is the world’s lowest source of cheap, clean octane,” she said. “Last year we exported more than 11.5 million metric tons of DDGs. One out of every 3 tons makes it to a foreign market, including China, Mexico, Southeast Asia and the Middle East.”

Frazier said the importance of ethanol to corn producers can’t be overstated.

“We purchase over 40 percent of the corn that’s produced in this country and turn it into ethanol and distillers grains,” he said. “Think of what would happen if 40 percent of your demand went away. It would be devastating to agriculture.”