Ethanol output climbs, but industry future remains uncertain

When it comes to ethanol production, the United States is still King Corn.

Domestic production of the fuel additive increased 20 percent between 2009 and 2010, accounting for 57 percent of global output, according to a recently released study from the independent research group Worldwatch Institute.

Brazil, which derives ethanol from sugarcane rather than corn, was the second-largest ethanol producer, producing 33 percent of the world’s ethanol.

Officials said growth in the United States’ ethanol industry could be attributed to high gas prices and disruptions in Brazilian ethanol production. There, weather has hurt sugarcane crops and the price of sugar has risen to the point that officials recently opted to reduce the amount being diverted to fuel.

The trend has continued this year, and the United States is now expected to surpass Brazil as the world’s top ethanol exporter in the second-half of 2011. The country became a net ethanol exporter for the first time last year, sending more than 343 million gallons abroad.

The long-term prospects for ethanol remain mixed, however.

Although higher fuel blends are being promoted, ethanol still accounts for less than 3 percent of the fuel used for road transportation globally. U.S. officials have meanwhile yet to come to terms with an extension of the fuel blender tax credit, which was created to build the previously fledgling industry.

The floundering economy has also led to concerns that global demand will wane, and rising food prices continue to cause concerns that diverting corn for fuel is a fool’s errand.

All of which is to say, when it comes to ethanol, the future is about as easy to predict as the weather. Which, as any farmer will tell you, isn’t all that predictable anymore.

Photo by Alternative Heat via Creative Commons.

One thought on “Ethanol output climbs, but industry future remains uncertain

  1. “…and rising food prices continue to cause concerns that diverting corn for fuel is a fool’s errand.”

    It is important to note that the corn used for ethanol is not the same type of corn that people eat. Besides ethanol, it is primarily used as an animal food. In addition to fuel, many ethanol plants today produce a co-product called dried distillers grains, or DDGs, a high-protein animal food. So we are getting both food and fuel from the same kernnel of corn.

    Certainly rising food costs around the globe are a reason for concern. But these are usually a result of local government policies and local weather-related crop failures, not by what we plant in the Midwest.

    The Congressional Budget Office looked at rising food prices in the U.S. between 2007-2008, and found that less than one percent of the price increases could be attributed to the higher cost of corn. The bulk of the food price increase was attributed instead to a sharp rise in petroleum fuel costs.