Corn Use for Ethanol Production

Corn Use for Ethanol Production
Darrel Good, Agricultural Economist - University of Illinois

This Wednesday USDA will update its corn crop estimates including the size of this year’s harvest and how it will be used. Todd Gleason has more…

Darrel Good, from the University of Illinois, thinks the crop…
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Darrel Good, from the University of Illinois, thinks the crop will be slightly smaller than last month’s forecast. The question is really how much of this crop will be consumed between now and next fall. Last month the Ag Department projected increased usage in several key areas including a 13.6 percent year-over-year increase for exports, an 8.7 percent uptick in feed and residual use, and even, notes Darrel Good, a 1.3 percent increase in corn used to make ethanol.

Good :49 …110 million bushels to feedstock requirements.

Quote Summary - The use of corn for ethanol production during the current marketing year will be influenced by a number of factors. These include the magnitude of domestic gasoline consumption; the rate of increase in the domestic consumption of higher ethanol blends; the magnitude of fuel ethanol trade; the change in the level of ethanol stocks; the use of other feed stocks, particularly sorghum, to produce ethanol; and the ethanol yield per unit of feedstock. Domestic gasoline consumption will be influenced by the price of crude oil and gasoline prices. If those prices remain near current levels, gasoline consumption would be expected to continue to increase, perhaps as much as two percent. The retail price of higher ethanol blends, particularly E85, appears to have become much more competitive with E10 in recent months. If prices remain competitive, some modest increase in consumption of those higher blends would be expected, but will not likely add substantially to total domestic ethanol consumption this year. Another small increase in ethanol production efficiency would moderate any increase in feed stock consumption this year. An increase of 300 million gallons in domestic ethanol consumption would add about 110 million bushels to feedstock requirements.

That’s not a 110 increase in corn usage, but a good portion might come from there. With a smaller sorghum crop in 2016 and higher sorghum prices relative to corn prices, use of sorghum for ethanol production might continue the decline seen in August. A decline of 25 to 50 million bushels for the year seems likely. Taken together, Darrel Good says, these factors point to use of about 5.345 billion bushels of corn for ethanol production during the current marketing year, 70 million larger than the current USDA projection.