Ethanol 101

Ethanol offers the solution to fuel shortages, polluted air and depressed farm economies.   

Auto exhaust adds to the air pollution of many of our country's cities.  Oil is a finite resource, and foreign markets have proven  an unstable source.  Today the U.S. imports over 50% of it's energy, more than at any other time in our history, and the number is expected to grow to 60% by the year 2010.  Transportation is a key factor in our oil dependence. Petroleum-derived gasoline, diesel and jet fuel make up 97% of our nation's transportation energy. Over 61% of petroleum used has to be imported. 

Farmers have found a way to help reduce carbon monoxide emissions from a renewable resource. Ethanol is an alcohol product produced from the starch portion of a kernel of corn. It contains nearly twice as much oxygen as any other gasoline additive. Each bushel of corn can produce 2.5 gallons of ethanol fuel. Only the starch from the corn is used to make ethanol, leaving the protein and valuable products for other uses. For example, that same bushel of corn can also produce: 1.5 pounds of corn oil, 12.4 pounds of 21% protein feed, 3 pounds of 60% protein gluten meal, and 17 pounds of carbon dioxide (used for carbonating soft drinks and other beverages).

What does it mean to our environment? 

The more oxygen in a fuel, the cleaner and more efficiently it burns.  Ethanol blended fuels burn cleaner and pollute less, therefore reduces air pollution. The U.S. EPA has determined that Ethanol-blended fuels reduce carbon monoxide emissions by 25-30 percent.  Ethanol is the only motor fuel that will not contribute to the "greenhouse effect", rather, Ethanol's high oxygen content reduces hydrocarbon emissions more than any other oxygenate.  Every gallon of ethanol used saves non-renewable petroleum as it is made from a renewable resource - grain.  One acre of American corn produces 300 gallons of ethanol - enough to drive 4 cars for one year and enough to displace 400 gallons of imported oil.  Much of the food value is removed from the corn and wheat before making ethanol, so you get both food and fuel from the same kernel of corn or wheat, fully utilizing the resource and diminishing waste.

What does it mean to our economy? 

Using ethanol, a renewable clean-burning domestic fuel, displaces imported oil which helps the U.S. better meet its energy demand and increase our country's energy security. The industry creates more than 55,000 jobs nationally in ethanol production and related industry and services.  Farmers benefit because ethanol production provides consistent demand for surplus corn and improves corn prices.  Many states have economic incentives as well to encourage the development of the ethanol industry. Some offer state tax incentives for ethanol blends or financial incentives or a combination of both.  Each dollar's worth of up-stream and on-farm economic activity attributable to ethanol production generates $3.20 in downstream economic stimulus.

Two specific pieces of federal legislation, the Clean Air Act Amendments of 1990 and the Energy Policy Act of 1992 mandate the phased-in adoption of cleaner burning vehicles. Under these federal laws, state, municipal and private fleets must meet stricter emission guidelines starting in 1998. This will be accomplished by replacing existing fleet vehicles with new "Clean Vehicle" technology like Ethanol use. By 2000, 70 percent of all new fleet vehicle purchases must meet these new standards.

What does it mean to our food prices and supply?

Food prices are largely determined by costs and profits after commodities leave the farm. On average, only about 19 percent of the price of food can be attributed to ingredients. Marketing and transportation costs make up a much higher portion of total costs.  The Center for Agricultural and Rural Development researchers have estimated that across all foods consumed, 30 percent higher corn prices would increase all average food prices by just 1.1 percent.

Ethanol is not diverting corn from food and feed markets. In 2006 corn producers produced the third largest crop on record. Current USDA projections are for 13.1 billion bushels this year – the largest corn crop on record and more than enough to supply all markets.  Agriculture is playing a large role in the supply of U.S. fuel. That will help offset any increase in food prices with lower fuel costs and cleaner, less-polluting renewable fuels. Moreover, government payments to farmers in 2007 will be reduced by $6 billion, as a result of higher crop prices.

About 50 percent of the corn crop is used for animal feed. Corn makes up a relatively large share of the product prices of eggs, pork, and poultry. Beef and dairy products also contain significant amounts of corn, but the prices of processed foods are largely determined by the cost of other components. Corn prices are not to blame for the high milk prices at the grocery store. International demand for dairy products has outstripped international supply. Moreover, the world demand for dairy products has put U.S. products onto world markets, thereby raising prices.

In the United States, consumers spend a relatively small amount of their disposable incomes on food--about 10 percent in 2005. Canadians today spend on average of about 14 percent of their disposable incomes on food compared to Mexicans who spend 26 percent.  Rapid productivity growth on the farm and along the food chain has caused food prices to rise more slowly than incomes. In the early 1950s, U.S. consumers spent about 20 percent on their disposable income on food.
 

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