Process Management

News last update:6 Aug 2012

US farmers embrace ethanol

US farmers overwhelmingly believe that ethanol has been good for American agriculture. The biofuel has boosted their bottom line, according to a poll by Reuters.

Ethanol manufacturers are expected to use 3.6 billion bushels of corn, or about 30% of the US corn crop during 2008/09. This is 7 percentage points up from about 23% the prior marketing year.

A study by Informa Economics forecast ethanol to climb to 34% of US corn production in 2009.

Nearly 80% of the 820 farmers surveyed at the American Farm Bureau Federation's annual meeting in San Antonio said ethanol was beneficial for agriculture, but 17% of respondents said it did more harm than good.

The Farm Bureau is the nation's largest farm group, representing producers of cattle and hogs as well as growers of cotton, wheat and corn.

Lower oil demand and the financial problems in the ethanol sector might depress corn use for ethanol. The Reuters poll found that still about 55% expected some of their corn crop to go toward production of the renewable fuel this year.

Ethanol has been sharply criticized by the food industry and aid groups for diverting corn away from livestock and food makers, pushing world food prices up.

Higher feed costs
Farmers were aware of the criticism, and 35% said ethanol's biggest impact was creating higher livestock and feed costs as well as higher food prices.

Farm and biofuel groups, along with the US Department of Agriculture, have deflected that criticism, saying factors other than ethanol are primarily to blame, including volatile oil prices and increased global food demand.

Slow growth
After years of rapid growth, ethanol has begun to show its age. But the government's so-called renewable fuels standard, which requires the use of 11.1 billion gallons of renewable fuels in 2009, should help growth during the next few years.

But some analysts and the Renewable Fuels Association, which represents the industry, are forecasting consolidation among ethanol firms due to tighter operating margins and less demand because of a drop in gasoline use.

USDA has cut its projection for corn used for ethanol by 400 million bushels in two months to reflect these concerns.

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