A story in today's Sunday Times (Sunday edition of New York Times) covers latest developments. There are currently 113 ethanol plants, diversely owned, whereas 10 years ago the industry was dominated by one large company, Archer Daniels Midland. Many more plants are in planning stage. Some are owned by mega-business (ADM still has 22% of total production) but some 40% are smaller independents. Because of proximity to source of raw materials, smaller operations can be price competitive.
It is hoped this will reclaim many parts of rural America by creating jobs in the plants and restoring or opening more acreage to grain production.
The story also reports the spike in production is putting pressure on corn prices.
I have two questions: will this bode ill for beverage alcohol distillers and consumers by causing price hikes in wholesale and retail prices? And, will this cause some beverage alcohol makers to move over to, or expand their existing, industrial alcohol production? Can more money be made from corn ethanol than from whiskey?
The story also reports favorable developments regarding conversion of unused straw and other agricultural wastes or by-products to fermentable sugar. It costs twice as much to convert such cellulose products to fermentables as for starch-rich corn, but technology is improving to narrow the gap.
Finally, the story suggests that this time, the ethanol boom may be for good. The trend certainly is benefiting from various government programs. But it seems motivated primarily by market forces which in turn reflect a deepening social and political committment to energy self-sufficiency.
Gary