ethanol

Events external to agriculture have set in motion the conditions for structural change in the marketing of corn in the U.S. These included a rapid increase in the price of crude oil from $40 per barrel to over $100 caused by hurricanes, geopolitical events, an increased global demand for energy from countries like China and India, and in December 2007, the U.S. raising the renewable fuel standards. The results of this research show that there could be significant changes in the historical utilization and marketing of corn in the U.S. The change in movement patterns provides one source of visible evidence that a structural change is underway.

A system of equations representing corn supply, feed demand, export demand, food, alcohol and industrial (FAI) demand, and corn price is estimated by three-stage least squares. A price dependent reduced form equation is then formed to investigate the effect of ethanol production on the national average corn price. The elasticity of corn price with respect to ethanol production is then obtained. Results suggest that ethanol production has a positive impact on the national corn price and that the demand from FAI has a greater impact on the corn price than other demand categories. Thus, significant growth in ethanol production is important in explaining corn price determination.

In the corn ethanol industry, the ability of plants to obtain favorable prices through marketing decisions is considered important for their overall economic performance. Based on a panel of surveyed of ethanol plants we extend data envelopment analysis (DEA) to decompose the economic efficiency of plants into conventional sources (technical and allocative efficiency) and a new component we call marketing efficiency. The latter measure allows us to evaluate plants’ ability to contract favorable prices of corn and ethanol relative to spot market prices and its implications for their overall economic performance. Results show that plants are very efficient from a technical point of view. Dispersion in overall economic performance observed across units is mainly explained by differences in allocative and marketing sources. Our results are consistent with the view that plants with higher production volumes may perform better, in part, because they can secure more favorable prices through improved marketing performance. Plants also seem to achieve significant improvements in marketing performance through experience and learning-by-doing. These results are consistent with two facts; 1) economies of scale may not be the only reason behind the increase in the average size of plants in the ethanol industry and; 2) there might be incentives for horizontal consolidation across plants.

When the lignocellulosic biofuels industry reaches maturity and many types of biomass sources become economically viable, management of multiple feedstock supplies – that vary in their yields, density (tons per unit area), harvest window, storage and seasonal costs, storage losses, transport distance to the production plant – will become increasingly important for the success of individual enterprises. The manager’s feedstock procurement problem is modeled as a multi-period sequence problem to account for dynamic management over time. The case is illustrated with a hypothetical 53 million annual US gallon cellulosic ethanol plant located in south west Kansas that requires approximately 700,000 metric dry tons of biomass. The problem is framed over 40 quarters (10 years), where the production manager minimizes cumulative costs by choosing the land acreage that has to be contracted with for corn stover collection, or dedicated energy production and the amount of biomass stored for off-season. The sensitivity of feedstock costs to changes in yield patterns, harvesting and transport costs, seasonal costs and the extent of area available for feedstock procurement are studied. The outputs of the model include expected feedstock cost and optimal mix of feedstocks used by the cellulosic ethanol plant every year. The problem is coded and solved using GAMS software. The analysis demonstrates how the feedstock choice affects the resulting raw material cost for cellulosic ethanol production, and how the optimal combination varies with two types of feedstocks (annual and perennial).

The purpose of this research was to determine whether indirect land use occurs and if so to what extent. Indirect land use is a change from non-cropland to cropland (e.g. deforestation) that may occur in response to increasing scarcity of cropland. As farmers worldwide respond to higher crop prices in order to maintain the global food supply and demand balance, pristine lands are cleared and converted to new cropland to replace the crops for feed and food that were diverted elsewhere to biofuels production. We examine the impact of corn-based ethanol production in the United States on land use in other countries.

In this study we use data envelopment analysis to decompose the overall economic efficiency of a sample of ethanol plants into three subcomponents: technical efficiency, allocative efficiency and a new component we call marketing efficiency. The relative importance of these sources of efficiency is of particular interest given the recent history of bankruptcies, plant closings and ownership change in the industry. Results reveal that observed production units are very efficient from a technical point of view as suggested by a standard deviation of 1% in technical efficiency. However, our results also show that bigger plants tend to be more economically efficient than others. The conventional methodology would have identified this difference as coming from allocative sources, i.e. bigger plants were correct in anticipating better relative prices and built more capacity accordingly. However introduction of a new concept we call marketing efficiency reveals that bigger production units obtain better relative prices (through marketing contracts) than smaller production units rather than anticipating prices more accurately. This might be a potential reason underlying the recent wave of mergers and acquisitions in the industry.

We assessed current water consumption during liquid fuel production, evaluating major steps of fuel lifecycle for five fuel pathways: bioethanol from corn, bioethanol from cellulosic feedstocks, gasoline from U.S. conventional crude obtained from onshore wells, gasoline from Saudi Arabian crude, and gasoline from Canadian oil sands.

Understanding the Growth of the Cellulosic Ethanol Industry, D. Sandor and R. Wallace, National Renewable Energy Laboratory, S. Peterson The Peterson Group, Technical Report, NREL/TP-150-42120 April 2008

Ethanol Industry Outlooks from past years are made available by the renewable Fuels Association. The reports include the latest trends,developments happening with regard to the ethanol industry.

The link provides data and reports related to bioenergy - ethanol and biodiesel produced by Minnesota.