Corn growers, the ethanol industry, and motoring public, and the rest of America are awaiting EPA’s decision on whether to allow ethanol to expand beyond the 10 percent blending limit, and if so, how much. The proposal being studied by EPA would have the blending limit increased to 15 percent, but other options being studied are 12 percent and retention at 10 percent. While the ethanol industry would have to increase its capacity, there are some other considerations that come first, including the impact of the expansion on acreage, on production, and how it would impact corn exports.

While ethanol continues to consume more and more corn every year, it still is second to livestock feed, and about three times the amount of corn exports. If more corn goes to the ethanol refinery, less will be exported, but more will have to be produced and that means more acreage. Those statistics are included in the report of Kansas State economist Dan O’Brien who also looked at the blending alternatives impact on distillers’ grains.

The economist makes several assumptions that are key to his calculations. Among those is that the carryout will not be allowed to decline under 1 billion bushels, and that for each 1 percent increase in the blend rate, 1.3 billion gallons of ethanol will need to be produced, consuming 464 million bushels of corn. It also assumes that the current maximum capacity for ethanol refiners would be 13.524 billion gallons in 2010 and 14.602 billion gallons in 2012. Among the other observations made by O’Brien is that increases in ethanol production would result in more DDGS production, and that DDGS needs would be met before any corn was exported.

Corn exported if the 10 percent blend was retained would decline from the 2.25 billion expected in 2012-13 to a low of 1.882 billion and then climb to 2.126 billion bushels. The decline results from the growing federal mandate to reach 15 billion gallons of ethanol production by 2015. If the EPA allows a 12 percent blend, US corn exports would reach a high of 2.0 billion bushels in 2012-13, decline to a 1.1 billion bushel low in 2015, and climb to 1.3 billion by the end of the decade. Under the 15% blend scenario, corn exports would have a 2.0 billion bushel high water mark in 2012, drop below 400 million in 2015 and return to the area of 600 million by the end of the decade.

For the complete article see the 07-30-2010 issue.

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