Like most of you, I’m a bit tired of all the less-than-positive news surrounding agriculture these days. While we’re obliged to report on what’s happening — good or bad — that’s impacting farm equipment sales, we can still dig around for a bit of good news wherever we can find it.
For example, despite all of the politics associated with the production and use of ethanol, there appears to be some positive developments. Because the growth in corn ethanol use helped fuel the farm equipment boom between 2008-14, this could also be construed as being positive for the sales of farm machinery.
First, let’s remove the “subsidies” argument against ethanol. The financial incentives that were designed to give its production a boost during the early stages of introducing its use as a fuel additive starting in 2005 disappeared a few years ago. The only government-induced advantage it still maintains is the mandatory requirements through the Renewable Fuel Standard for increasing its annual production. But as we’ve seen recently, the EPA is doing its best to take the edge off that, too.
Despite its slowing growth, in 2015 the U.S. exported corn ethanol to 35 different countries. According to the Energy Information Admn. (EIA), U.S. exports of fuel ethanol reached their highest level in 4 years in 2015, totalling 844 million gallons, a slight increase from 2014 and second only to the 1.2 billion gallons exported during 2011.
Unfortunately, legislators in California are doing their best to dilute even this little bit of good news. So, while exports of ethanol have increased, so have its imports. U.S. imports of the fuel additive, which totalled 73 million gallons in 2014, also increased in 2015, reaching a total of 92 million gallons.
According to the EIA, almost all (96%) U.S. imports came from Brazil, up from 74% in 2014. The Renewable Fuel Standard (RFS) and California Low Carbon Fuel Standard (LCFS) targets for the use of biofuels with low greenhouse gas (GHG) emissions was the primary driver in the increased U.S. import demand for ethanol.
EIA explains: “Lifecycle GHG emissions from sugarcane ethanol production as estimated by scoring systems used in these programs are significantly lower than those from conventionally produced corn ethanol. The California LCFS, which mandates progressively more stringent requirements for increased blending of low GHG fuel components over time, was particularly important in driving larger volumes of Brazilian ethanol imports in 2015, with 44 million gallons entering the U.S. on the West Coast, more than triple the 13 million gallons imported in 2014.”
OK. Let’s try this. According to a March 23 Reuters report, Big Corn Finds Unlikely Allies in U.S. Biofuel Push, “Almost a fifth of the vehicles on U.S. roads can safely handle E15 fuel, a gasoline with 15% ethanol content, or 50% more than the typical U.S. blend. This is considerably above the 14% estimate from June 2015 … and that share could climb to nearly a quarter by the end of the year if brisk auto sales continue.”
The report continues, “Analysts say the trend marks a significant victory for U.S. ethanol manufacturers. At stake is about $10 billion that oil firms would lose to ethanol producers if the higher ethanol blend became the new norm in a U.S. gasoline market worth about $290 billion, based on average retail prices and gasoline demand of about 142 billion gallons.”
The biggest hurdle to increasing use of the 15% blend is the lack of gas pumps to handle the additional ethanol content. It may take a while, but these are coming, as well. John O'Dell, an independent automotive industry specialist in Orange County, Calif., says, "The manufacturers are starting to come around to redesigning fuel systems to handle E15 and that will slowly but surely see a growth of pumps that handle it."
This data also undermines the oil industry's long standing argument that there is no room for mainstream acceptance of E15 because it would require major redesigns by vehicle manufacturers and its greater take-up by gas retailers, according to Reuters.
Also, arguments about the energy required to produce ethanol have been largely negated. According to the “2015 Energy Balance for the Corn-Ethanol Industry,” a study produced by USDA and Iowa State University, all direct energy components have declined by about 50% since the mid-90s. Together, the nitrogen and direct energy reductions result in a 30% decline in the energy required to produce a bushel of corn. Overall 65,298 BTU/bushel were required for corn production in 1996 whereas 37,666 BTU/bushel were required in 2010.”
The study concludes that overall, “ethanol has made the transition from an energy sink, to a moderate net energy gain in the 1990s, to a substantial net energy gain in the present. And there are still prospects for improvement.”
I know this is a lot of words to provide a little good news, but then again, it takes a lot more time to find good ag news these days.