Monday, September 13, 2010

How Much Corn Ethanol is the U.S. Exporting and Why?

photo source

The latest numbers on U.S. exports of corn ethanol and DDGS's (distillers dried grains with solubles) have been reported by the Renewable Fuels Association, a lobbying group for the ethanol industry.
  • U.S. ethanol production and demand reached an all time high in June of 2010. The total U.S. corn ethanol production for 2010 is expected to be 12.87 billion gallons.
  • The ethanol exports this year total 182.7 million gallons so far, on pace to easily break the ethanol export record set in 1995.
  • Canada, the largest importer of our ethanol, imported 42% of the July export amount.
  • The latest numbers from the USDA show that 36% of corn produced in the U.S. in 2010/2011 will go to produce ethanol.
  • One-third of ethanol production ends up in the form of DDGS product.
  • DDGS exports have hit new highs already this year with the expectation of exporting 8.5 million metric tons, or 28% of product.
  • China imported 40% of the July DDGS export product.
  • The USDA expects another all-time record for corn production in the U.S. (13.16 billion bushels), though the demand for corn is expected to be lower by 50 million bushels.
  • Ethanol demand remains unchanged in the U.S. for 2010/2011, according to the report.

Back in May, I did a rant on the subject of the U.S. exporting government-subsidized corn ethanol. This is an Agri-business and politically driven model which makes no sense. This whole biofuel story might even be compared to grain destroying programs which were used to increase the price of agricultural commodities during the Great Depression. According to my calculations, we are exporting over 2.4% of the ethanol we will produce in 2010. While that amount may not seem real significant, the government policy of allowing the export of ethanol is significant.

A case in point is the question of why doesn't Iowa promote and use its own product? Robert Rapier wrote an article for "The Oil Drum" in which he described the irony of Iowa's situation so well:

Gasoline consumption in Iowa is presently around 1.6 billion gallons per year. This is the energy equivalent of 2.4 billion gallons per year of ethanol. Yet amazingly, Iowa does not have an E10 blend mandate (that is, a mandate for a mixture of 90% gasoline and 10% ethanol) that is so common in many other states. Of the 3.5 billion gallons of ethanol Iowa produces each year, only 100 million gallons is consumed in the state (less than 3%!). Perhaps even more amazing is that Iowa — seemingly the best candidate in the U.S. for biofuel self-sufficiency — ranks in the Top 10 consumers of gasoline per capita in the U.S.

If the policy goal, as stated, is really to produce ethanol for our nation's energy security and independence, then wouldn't we use it ourselves instead of exporting it, both at the local and national levels? Instead, it appears that we are creating a product we don't want or don't need ourselves while at the same time we are aggressively marketing it and its by-products abroad.

Perhaps that is why you never see this ethanol export story in the main stream news.

We get much of our liquid transportation fuel supply from Canadian tar sands. So, why is Canada our largest importer of ethanol, importing 42% of our July exports? Pray tell us, what are they doing with it? On August 12, 2010 the WSJ ran an article describing the ongoing EU investigation into U.S. shipments of biodiesel through Canada and Singapore to avoid direct shipment tariffs. Is there a similar story to be told with ethanol? This same WSJ article also brings up the question I raised here about ethanol production in regards to the motives behind biodiesel production in the U.S. "The tax credit, which was meant to promote the use of cleaner fuels in the U.S., doesn't require that the biodiesel be consumed domestically."

Both ethanol production and the export of ethanol, it seems to me, could be used as a barometer of bad agricultural policy in the U.S. That is, the more corn ethanol we produce and export the worse our policy is. I love the American farmer, but I hate the American agricultural policy.