The United States needs more than corn-based ethanol production to shed the shackles of imported crude oil dependence.
A combination of renewable energy sources, including grain, cellulosic ethanol, biodiesel, and solid waste hold the key to our energy future, says a USDA energy expert.
Roger Conway, with the USDA Office of Energy Policy, New Uses, says despite a rapid ramping-up of U.S. ethanol production capacity, the country's insatiable desire for energy — combined with a growing world demand (especially from India and China) and competing demands on U.S. grain production — make dependence on corn-based ethanol problematic.
Conway, speaking at a recent Texas Ag Forum at Austin, said the U.S. currently has 111 ethanol plants in operation, with 75 more under construction and eight expanding capacity. Another 60 plants are in planning stages.
Annual production has increased from 1.6 billion gallons a year in 2000 to more than 5 billion gallons in 2005, with expectations of reaching 9 billion by 2008 or 2009.
But replacing a big chunk of the 58 percent of the crude oil the United Sates currently imports requires more than corn ethanol can deliver. “Corn stocks are increasingly tight; the price is high and that means more risk for ethanol plants.”
He says corn ethanol will “play a role in energy security, but more as an additive than an extender. Corn ethanol alone cannot reduce significantly our dependence on imported crude oil. Cellulosic ethanol is our best renewable energy alternative. Corn stover, forest residues, and municipal solid waste offer possibilities.”
Conway says ethanol production must exist within the context of providing for the domestic livestock industry and export markets. He said some have suggested removing land from the Conservation Reserve Program (CRP) as a means to increase corn production. Only a small percentage of those acres, however, could produce corn or soybeans on a sustainable level, he says.
“If we use the same land for energy independence we use for grain and soybean production, we still have challenges.”
Biodiesel also faces challenges, even with a similar upturn in demand and production. From a 500,000-gallon annual output in 1999, biodiesel production soared to more than 90 million gallons by 2005.
Increasing cost of biodiesel feedstocks, soybeans mostly, poses the biggest challenge for economic production.
“The surge in oil prices and a tax incentive help,” Conway says.
Henry Bryant, with the Texas A&M Ag and Food Policy Center, says increased demand for ethanol and biodiesel means higher prices for agricultural commodities. Corn prices, he says, should be more than $4 per bushel, “probably closer to $5. Soybeans will be just below $8 per bushel and soybean oil near 50 cents a pound.”
He says corn feed use and corn exports will decline, exports by a substantial amount. He expects a 10 percent decline in soybean exports.
Bryant says corn acreage nationally could increase to more than 90 million; soybeans to more than 70 million; and cotton close to 14 million acres.
Market incentives such as the Renewable Fuels Standards and tax advantages continue to support domestic ethanol and biodiesel production.
Bryant also expects:
A lot more ethanol production.
Some more biodiesel.
Higher prices for agricultural commodities.
Declining exports, especially for corn.
More corn acreage.
Effects on the agricultural economy will be minimal over the next five years.
Bryant says the need for renewable fuels is underscored by uncertainties in crude oil supplies.
“We've seen high prices the past few years, partly because of geopolitical issues,” he says. “We also have a declining rate of global petroleum production and the economic growth (with increasing energy demands) of China and India. And OPEC is always a question.”