Omaha World-Herald editorial: Ethanol comes into its own

Source: By Omaha World Herald Editorial Board • Posted: Wednesday, April 29, 2015

For years, Nebraskans wondered whether the state’s fledgling ethanol sector would amount to much. Now, the answer is in, as explained in a new report from University of Nebraska economists.

From small beginnings in the 1980s, the report says, Nebraska’s ethanol sector has grown into a major economic segment.

The value of Nebraska’s annual production of ethanol and distillers’ grain totals nearly $5 billion. That’s greater than the size of the state’s $3.5 billion soybean sector.

Ethanol’s annual economic contribution to the state, the University of Nebraska-Lincoln economists report, is equal to 67 percent of the value of Nebraska’s $6.6 billion corn industry and to 57 percent of the state’s largest ag sector, the $10.5 billion cattle industry.

With production last year of more than 1.8 billion gallons of ethanol at 24 plants, Nebraska is now our country’s second-largest ethanol producer, behind only Iowa.

The industry employs around 1,300 people directly and supports about 3,300 jobs indirectly. The largest ethanol plant in the state is the Archer Daniels Midlands complex in Columbus, employing 285 people.

For the remaining 23 plants, the average employment is smaller, about 44 positions apiece. Yet those jobs make a significant contribution to small communities such as Adams, Albion and Plainview in eastern Nebraska; Cambridge and Sutherland in the central part of the state; Trenton in the southwest; and Bridgeport in the Panhandle.

The average wage at Nebraska ethanol plants is 21 percent higher than the state’s average manufacturing wage, the UNL report says. Wages and salaries in Nebraska’s ethanol sector total $71 million.

As economists regularly note, a particular combination of factors in Nebraska makes the state well-suited for ethanol production. Corn production is ample, the distillers grain produced by the ethanol process is used as cattle feed, and the northern Plains’ share of U.S. cattle production continues to expand.

As for the future, the U.S. Department of Agriculture recently issued its 10-year projections for the country’s ag economy. The USDA concluded that “ethanol production in the United States is projected to be relatively flat over the next decade, with most production using corn as the feedstock.”

The USDA also stated, “This projection reflects declining overall gasoline consumption in the United States, which is mostly a 10 percent ethanol blend, or E10; infrastructural and other constraints on growth in the E15 (15 percent ethanol blend) market; and the small size of the E85 (85 percent ethanol blend) market.”

Still, the USDA said, “A strong presence for ethanol in the sector continues, with about 35 percent of total corn use expected to go to ethanol production during the projection period.”

One emerging trend noted by the report’s authors is the export market for ethanol. “In 2005, U.S. exports were 62 million gallons, peaking in 2011 at 1,193 million, and in 2014 were 836 million — more than 10 times larger than 10 years before,” the report said. In 2014, exports accounted for 5.8 percent of U.S. ethanol production, with Canada the leading importer of American ethanol, followed by Brazil, the United Arab Emirates and the Philippines.

The UNL economists identified expansion opportunities for Nebraska’s ethanol sector, including carbon dioxide (used in food processing and beverage production and in stimulating oil and natural gas wells) and corn oil.

The ethanol sector has grown into a major economic player in Nebraska. As it moves into the future, the industry’s task is to address its challenges while seizing new opportunities.