Is the ethanol gold rush over?
Corn prices may have taken the bloom off the biofuel rose
By Dave Hannon -- Purchasing, 1/29/2007 1:29:00 PM
The great ethanol debate is on. In the wake of President Bush’s highlighting biofuels in his State of the Union speech, industry experts on both sides of the biofuel issue are coming out of the woodwork to weigh in on the future of ethanol and the biofuels issue in general.
Specifically, the President’s call to increase the supply of alternative fuels to 35 billion gallons by 2017, has drawn the most reaction.
"We heard a huge number from the President, and the first reaction is no way is that possible," at least under current circumstances, said Jacob Golbitz of HighQuest Partners in a recent UPI report. He added that even in a best-case scenario the U.S. would only be able to produce 16 billion gallons of biofuel per year by 2015, assuming that most of the biofuel would be corn-based ethanol.
A recent Bloomberg report said Exxon Mobil Corp. considers ethanol “irrelevant” as a solution to an addiction that forces the U.S. to import two-thirds of its oil. No ``viable, meaningful business proposition'' exists for Exxon in ethanol, according to Stuart McGill, Exxon’s senior vice president.
“The gold rush is over,'' was how Michael Liebreich, CEO of London-based New Energy Finance, summed up the ethanol market in a recent Bloomberg report. ``Many of the new plants that have been announced will never see the light of the day.''
“Anybody could have made money last year. You didn't even have to be a good manager," said Troy Prescott, a Randolph County farmer and president of Cardinal Ethanol, in a recent story in the Indiana Star. "But the numbers are not as attractive as they were this summer."
The American Coalition for Ethanol praised the President’s goal. In a statement released last week, Brian Jennings, ACE spokesperson said, “it sends a very powerful signal that an ambitious yet attainable Renewable Fuels Standard goal is the ideal strategy to strengthen energy security and independence in the U.S. An RFS level of 35 billion gallons by 2017 is consistent with ACE’s call for an RFS of 60 billion gallons by 2030.”
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The supply and price of corn may play a prominent role in the future of U.S. ethanol production. U.S. Undersecretary of Agriculture Thomas Dorr said at a clean fuels finance conference in London reported by Bloomberg, ``There's clearly a terrific demand on corn right now. There is no question that the next couple of years are going to be painful.''
Edgar Seward, general manager at Indiana Bio-Energy, said in the Star article, currently corn would cost him $1.40 for every gallon of ethanol he produces. But he insists that leaves enough room for profit at present ethanol prices.
The flip side of the corn issue is what’s left for farmers? According to one report,
in 2000, about 6% of the nation's corn harvest went to produce about 1.6 billion gallons of ethanol. Last year, 20% of the corn harvest was used to make 5 billion gallons of ethanol.
But in the same report, Ron Miller, the president of ethanol producer Aventine Renewable Energy, says “the markets are adjusting to the shifting demands for grain. All indications are that corn farmers are going to dramatically increase the acres planted (this year)."
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