Ethanol can be a profitable business for producers and farmers.
Elevated crude oil prices make ethanol an attractive alternative for consumers and farmers alike.
Crude oil prices jumped from $25 per barrel in 2004 to record highs of more than $70 in 2006. Supply was tight even though oil producers in many countries operated their petroleum facilities and refineries at or near capacity.
As a result, renewable fuel sources have become more economically viable and this has strengthened agricultural markets. The United States Department of Agriculture estimates corn prices have already received a $0.25-$0.50 per bushel boost from ethanol producers. That is projected to lead to additional acres being planted and to more potash being used.
It takes one bushel of corn to produce 2.8 gallons of ethanol. At the current annual production level of 11 billion bushels of corn, production of each 1 billion gallons of ethanol consumes about 3.2 percent of the total US corn crop.
Some experts are forecasting that production of this biofuel could consume more than 40 percent of the corn crop in years ahead.
The Green Factor
The benefits of biofuels are here to stay, as they extend beyond economics and opportunity. They also provide environmental advantages:
Ethanol burns more cleanly and reduces emissions of carbon monoxide and other pollutants. According to the Environmental Protection Agency, it can reduce emissions by 10-30 percent.
Research conducted by Argonne National Lab (ANL) showed that gasoline with 10 percent ethanol reduced greenhouse gas emissions by 12-19 percent compared to conventional gasoline.
ANL research estimated that ethanol use in the United States in 2004 reduced CO2-equivalent greenhouse gas emissions by approximately 7 million tons. That is roughly equivalent to removing 1 million cars from the road.
Scientists are continuing to explore new fuel technologies, including methods of converting crop biomass containing cellulose/hemicellulose, such as switch grass, into ethanol. Commercialization of this technology is expected to take several years to complete.
This document contains forward-looking statements which involve risks and uncertainties, including those referred to in the company’s annual report. A number of factors could cause actual developments to differ materially from those in the forward-looking statements, including, but not limited to, fluctuation in supply and demand of primary products and raw materials; changes in competitive pressures, including pricing pressures; changes in capital markets; changes in currency and exchange rates; unexpected geological or environmental conditions; and government policy changes.
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